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Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.00 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company's stock is 9.20 percent, 12.70 percent, and 14.30 percent, respectively. Required:(a) What is the stock price for Red. Inc., Company

Sagot :

abiolataiwo2015

Answer:

Red Inc stock price=$93.75

Yellow Corp stock price=$44.78

Blue company=$36.14

Explanation:

Calculation for What is the stock price

Using this formula

Stock price=D1/(Required return-Growth rate)

Let plug in the formula

Red Inc stock price=3.00/(0.092-0.06)

Red Inc stock price=3.00/0.032

Red Inc stock price=$93.75

Yellow Corp stock price=3.00/(0.127-0.06)

Yellow Corp stock price=3.00/0.067

Yellow Corp stock price=$44.78

Blue company =3.00/(0.143-0.06)

Blue company=3.00/0.083

Blue company=$36.14

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