Ask Question
24 January, 05:35

Poulter Corporation will pay a dividend of $3.25 per share next year. The company pledges to increase its dividend by 5.1 percent per year, indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the company's stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

+5
Answers (1)
  1. 24 January, 07:33
    0
    Price of stock = $55.08

    Explanation:

    The price of a stock is the present value of the future dividends discounted at the required rate of return.

    P = D / (r-g)

    P-price of stock today, D - Dividend in year's time, r - required rate of return,

    g - growth rate in dividend

    Using the following parameters:

    P = ?, r - 11%, g - 5.1%

    P = 3.25 / (0.11-0.051)

    P = 55.08474576

    Price of stock = $55.08
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Poulter Corporation will pay a dividend of $3.25 per share next year. The company pledges to increase its dividend by 5.1 percent per year, ...” 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