Ask Question
1 August, 13:48

MTB Industries currently pays an annual dividend of $1.50 per share, and it is expected that these dividend payments will continue indefinitely. If the firm's equity cost of capital is 12%, the value of a share of MTB stock is closest to:

+3
Answers (1)
  1. 1 August, 15:04
    0
    The value of MTB stock is closest to $12.50

    Explanation:

    The value of MTB stock is calculated using the below formula for the present of an annuity in perpetuity=dividend/expected rate of return

    The expected rate of return in this instance is the equity cost of capital

    Value of MTB stock=$1.50/12%

    Value of MTB stock=$12.5

    A rational investor a price for a stock today that reflects the future cash flows payable by a way of dividends payments promised by such stock considering the investor's rate of return as done above
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “MTB Industries currently pays an annual dividend of $1.50 per share, and it is expected that these dividend payments will continue ...” 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