Question

suppose your company is expected to grow at a constant rate of 7 percent long into the future. in addition, its dividend yield is expected to be 8 percent. if your company expects to pay a dividend equal to $1.78 per share at the end of the year, what is the value of your firm's stock? round your answer to the nearest cent.

Answer 1

$178

Step-by-step explanation:

To calculate the value of the firm's stock using the constant growth dividend discount model, we can use the following formula:

Stock Value = (Dividend per Share) / (Discount Rate - Dividend Growth Rate)

In this case, the dividend per share is $1.78 and the dividend growth rate is 7%, so:

Stock Value = $1.78 / (0.08 - 0.07) = $178

Therefore, the value of the firm's stock is $178 per share.