Question

NoGiomth copporation currenty pays a dividend of 50.57 per quarter and n will continue to pay this dividend forever What is the price per share of No Growth stockis the firm's equity cost of caphal is 154% ? The slock price is 5 (Round to the nearest cent)

Answer 1

The price per share of a no-growth stock can be calculated using the dividend discount model (DDM), which takes into account the dividend and the equity cost of capital. However, the given stock price of $5 seems to be incorrect based on the calculations.

Step-by-step explanation:

To calculate the price per share of a no-growth stock, we can use the dividend discount model (DDM). The DDM formula is:

Price per Share = Dividend / Equity Cost of Capital

In this case, the dividend is $50.57 per quarter, and the equity cost of capital is 1.54%. Plugging those values into the formula, we get:

Price per Share = $50.57 / 1.54% = $3287.66

However, the provided stock price is $5, which is significantly lower than the calculated value. This could indicate some error in the given information or calculations.