Ask Question
1 June, 06:11

The last dividend (D0) is $1.80, the growth rate (g) is 6%, and the required rate of return (r) is 12%. What is the stock price according to the constant growth dividend model

+5
Answers (1)
  1. 1 June, 06:41
    0
    Price = $31.8

    Explanation:

    The formula for constant growth dividend model is:

    Price = D1

    r-g

    Or

    Price = D0 (1+g)

    r-g

    where,

    D0 = Last Dividend Paid

    r = required rate of return

    g = growth rate

    Substitute the values now in the formula according:

    Price = 1.80 (1+0.06)

    0.12-0.06

    Price = 1.908

    0.06

    Price = $31.8
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The last dividend (D0) is $1.80, the growth rate (g) is 6%, and the required rate of return (r) is 12%. What is the stock price according ...” 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