Question

just paid $2.55 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 5.5 percent. If you require a rate of return of 9.7 percent, how much are you willing to pay today to purchase one share of the company's stock?

Answer 1

$64.04.

Step-by-step explanation:

P0 = [$2.55 (1 + 0.055) / (0.097 - 0.055)]

P0 = 2.69 / 0.042

P0 = $64.04.