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The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.10 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. Investors require a return
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The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.10 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. Investors require a return of 11 percent on the company's stock. a. What is the current stock price

User Neeraj Tangariya
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1 Answer

15 votes
15 votes

Answer:

the current stock price is $19.25

Step-by-step explanation:

The computation of the current stock price is shown below:

= Dividend × (1 + growth rate) ÷ (Required rate of return - growth rate)

= $1.10 × (1 + 0.05) ÷ (11% - 5%)

= $1.155 ÷ 6%

= $19.25

hence, the current stock price is $19.25

We simply applied the above formula

User Eolmar
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