Answered

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Suppose cyclone industrial inc will pay a dividend of 1.65 per share next year. The require return on the stock is 8% and its dividends will grow by 2% per year indefinitely. What is the stock price today?

Sagot :

Answer:

$27.50

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

$1.65 / ( 0.08 - 0.02) = $27.50

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