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19 July, 23:43

A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate, g, is 4.0%. According to the dividend discount model, the current stock price is closest to:A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate, g, is 4.0%. According to the dividend discount model, the current stock price is closest to:

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  1. 20 July, 02:32
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    Current Stock Price Is $25.57

    Explanation:

    According to the scenario, computation of the given data are as follows:-

    Dividend (D0) = $1.50

    Required rate of return (R) = 10.1 = 0.101

    Growth rate (G) = 4.0% = 0.04

    D1 = D0 (1 + G)

    = $1.50 * (1+0.04) = $1.50 * 1.04

    = $1.56

    Current Stock Price (P0) = D1 : (R-G)

    = $1.56 : (0.101 - 0.04)

    = $1.56 : 0.061

    = $25.57

    Current Stock Price Is $25.57
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