Question

4pass Inc. just paid an annual dividend of $1.12. The company follows a dividend policy that raises dividends annually at a rate of 4% (and expects this rate to go forever). The required rate of return is 13%. What is today's stock price?

Answer 1

the stock price today is $12.94

Step-by-step explanation:

The computation of the stock price today is as follows;

Current price = Dividend at year 1 ÷ (Required return - Growth rate)

= ($1.12 × 1.04) ÷ (0.13 - 0.04)

= $12.94

hence, the stock price today is $12.94

It could be computed by applying the given formula so that the correct price could come