Answered

Discover a wealth of knowledge at Westonci.ca, where experts provide answers to your most pressing questions. Get quick and reliable solutions to your questions from a community of seasoned experts on our user-friendly platform. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform.

A company pays a constant 6.5 dividend on stock. The dividend will maintain for the next 12 years and cease forever. The required return on the stock is 9.1 percent. What is the current share price?

Sagot :

abiolataiwo2015

Answer:

$46.31

Explanation:

Calculation to determine the current share price

Using this formula

Current share price=6.5*Present value of annuity factor(9.1%,12)

Present value of annuity=Annuity*[1-(1+interest rate)^-time period]/rate

Let plug in the formula

Current share price=6.5*[1-(1+0.091)^-12]/0.091

Current share price=6.5*[1-(1.091)^-12]/0.091

Current share price=6.5*7.124793

Current share price=$46.31

Therefore the current share price will be $46.31

Thanks for stopping by. We are committed to providing the best answers for all your questions. See you again soon. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. We're dedicated to helping you find the answers you need at Westonci.ca. Don't hesitate to return for more.