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28 June, 06:59

Tresnan Brothers is expected to pay a $2.95 dividend on its common stock at at the end of this year. This company's dividends are expected to grow at a constant rate of 4% per year. If the required rate of return on the stock is 8.45%, what is the stock's current value per share? (your answer should be to two decimal places)

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  1. 28 June, 08:59
    0
    current value = $66.29

    Explanation:

    given data

    expected to pay dividend = $2.95

    constant rate = 4% per year

    required rate of return = 8.45%

    solution

    Stock's current value per share will be express as

    current value = dividend : (Required rate of return - Growth rate of dividend) ... 1

    put here value and we get

    current value = $2.95 : (8.45% - 4%)

    current value = $66.29
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