The good life offers a common stock that pays an annual dividend of $2 a share. the company has promised to maintain a constant dividend. how much are you willing to pay for one share of this stock if you want to earn a 9 percent return on your equity investments

Given:

annual dividend of $2 per share

9% return on your equity investment.

return on equity investment refers to annual dividends, so we simply divide the dividend by the percentage to get how much one has to pay for a share of stock.

2 / 0.09 = 22.22

You must pay $22.22 per share in order to earn 2, the 9% return on equity investment.