Question

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.05 per share on its stock. The dividends are expected to grow at a constant rate of 7 percent per year indefinitely. If investors require a 14 percent return on The Jackson-Timberlake Wardrobe Co. stock, what is the current price? Answer with 2 decimals (e.g. 10.12).

Answer 1

the current share price is $16.05

Step-by-step explanation:

The computation of the current share price is as follows;

= Dividend ÷ (required rate of return - growth rate0

= $1.05 × 1.07 ÷ (14% - 7%)

= $1.1235 ÷ 0.07

= $16.05

Hence, the current share price is $16.05

The same should be considered and relevant