Ask Question
24 May, 17:31

Stability Inc. has maintained a dividend payment of $4 per share for many years. The same dividend is expected to be paid in future years. If investors require a 12% rate of return on similar investments, determine the present value of the company's stock. a. $15.00 b. $30.00 c. $33.33 d. $35.00 e. $40.00

+5
Answers (1)
  1. 24 May, 17:41
    0
    The correct answer is $33.33 (approx.).

    Explanation:

    According to the scenario, the given data are as follows:

    Annual dividend payment = $4

    Required return rate = 12%

    So, we can calculate the present value of company's stock by using following formula:

    Present value = Annual Dividend / Required Return Rate

    = $4 / 12%

    = $4 / 0.12

    = $33.33 (approx)

    Hence, the present value of company's stock is $33.33.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Stability Inc. has maintained a dividend payment of $4 per share for many years. The same dividend is expected to be paid in future years. ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers