Question

Horseshoe Stables is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. the last annual dividend was $.86 a share but all future dividends will be decreased by 3.5 percent annually. What is a share of this stock worth today at a required return of 17.8 percent?A) $3.06B) $3.90C) $3.41D) $3.59E) $3.95

Answer 1

B. $3.90

Step-by-step explanation:

P0 = {$.86 × [1 + (-.035)]} / [.178 - (-.035)] = $3.90