Question

Nash's Trading Post, LLC has a current stock price of $30.00. The company paid $1.00 in dividends this year and dividends are expected to grow at 5% per year. If you have a required return of 9%, what is Nash's Trading Post, LLC worth to you?

Answer 1

Nash's Trading Post, LLC is worth $25.00 to you based on the given information.

Step-by-step explanation:

To determine the value of Nash's Trading Post, LLC to you, we can use the dividend discount model (DDM) formula. The DDM calculates the present value of expected future dividends. Given that the current stock price is $30.00, the dividends expected to grow at 5% per year, and your required return is 9%, we can use the formula:

Value = Dividend / (Required Rate of Return - Dividend Growth Rate)

Plugging in the values, we get:

Value = $1.00 / (0.09 - 0.05) = $25.00

Therefore, Nash's Trading Post, LLC is worth $25.00 to you based on the given information.