Question

what about kraft heinz. they currently pay an annual dividend of $5.67 and we expect that to grow at a constant rate of 3.3%. assuming the market requires a(n) 9.8% return from kraft heinz, what is their stock worth? (hint: round intermediate calculations and answer to 2 decimal places)

Answer 1

The stock of Kraft Heinz is worth $167.65.

Step-by-step explanation:

To calculate the value of a stock, we can use the dividend discount model (DDM). The DDM formula is Stock Value = Dividend / (Required Rate of Return - Dividend Growth Rate).

In this case, the annual dividend is $5.67, the required rate of return is 9.8%, and the dividend growth rate is 3.3%. Plugging these values into the DDM formula, we get Stock Value = $5.67 / (0.098 - 0.033) = $167.65. Therefore, the stock of Kraft Heinz is worth $167.65.