Question

Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $3.00 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a return of 15.80 percent on your equity investments

Answer 1

You are willing to pay $18.99 for one share of this stock.

Step-by-step explanation:

This can be calculated using the following formula:

P = d / r .............................. (1)

Where;

P = price per share = ?

d = annual dividend per share = $3.00

r = equity investments return = 15.80%, or 0.1580

Substituting the values into equation (1), we have:

P = $3.00 / 0.1580

P = $18.99

Therefore, you willing to pay $18.99 for one share of this stock.