Metroplex Corporation will pay a $5.20 per share dividend next year. The company pledges to increase its dividend by 7.20 percent per year indefinitely. If you require a 14.00 percent return on your investment, how much will you pay for the company's stock today

The maximum amount that an onvestor would be willing to pay for the stock today is $76.47

Explanation:

The constant growth model of the dividend growth adn DDM aproach will be used to calcualte the value of the stock as its dividends will grow by a constant percentage forever.

The price of the stock today based on this model will be,

P0 = D1 / r - g

Where,

D1 is the dividend expected for next year

r is the required rate of return

g is the growth rate in dividends

P0 = 5.2 / (0.14 - 0.072)

P0 = $76.47