Final answer:
To calculate the current price of Hudson Corporation's stock, the Gordon Growth Model is used, considering a $3.70 dividend growing at 7.60 percent annually, with a required return of 9.80 percent. This results in a stock price of $168.18.
Step-by-step explanation:
The question relates to valuing a company's stock based on its future dividend payments. To determine the price you would pay for Hudson Corporation's stock, given it will pay an initial dividend of $3.70 that grows at 7.60 percent annually and you require a 9.80 percent return on your investment, you use the Gordon Growth Model (a version of the Dividend Discount Model).
The formula for pricing a stock with growing dividends is: P = D / (r - g), where P is the price of the stock, D is the dividend in the first year, r is the required rate of return, and g is the growth rate in dividends.
Plugging the values into the formula, we get P = $3.70 / (0.098 - 0.076) = $3.70 / 0.022 = $168.18. Therefore, you would be willing to pay $168.18 for Hudson Corporation's stock today.