Question

3) Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $2.60 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a return of 13.80 percent on your equity investments?2PTS

Answer 1

D = $2.60

Ke = 13.80% = 0.1380

Po = D/Ke

Po = $2.60/0.1380

Po = $18.84

Step-by-step explanation:

In this question, there is need to divide the current dividend paid by cost of equity in order to obtain the current market price of equity.