Question

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $2.15 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. Investors require a return of 10.5 percent on the company's stock. a. What is the current stock price

Answer 1

the current stock price is $34.40

Step-by-step explanation:

The computation of the current stock price is shown below:

Current price is

= D1 ÷ (Required return - Growth rate)

= (2.15 × 1.04) ÷ (0.105 - 0.04)

= $34.4

Hence, the current stock price is $34.40

We simply applied the above formula so that the correct answer could come