Question

Wesen Corp. will pay a dividend of $4.00 next year. The company has stated that it will maintain a constant growth rate of 5 percent a year forever. If you want a return of 17 percent, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price $ If you want a return of 11 percent, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price $

Answer 1

IF we want return of 17%

R=17

G= 5%

D= 4

Price = 4*1.05/0.17-0.05=$35

IF we want return of 11%

R=11

G= 5%

D= 4

Price = 4*1.05/0.11-0.05=$70

Step-by-step explanation: