Question

Martin's Yachts has paid annual dividends of $1.40, $1.75, and $2.10 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively constant. Given the lack of future growth, you will only buy this stock if you can earn at least a 12% rate of return. What is the maximum amount you are willing to pay to buy one share of this stock today

Answer 1

$17.50

Step-by-step explanation:

Price i would be willing to pay = last dividend paid / rate of return

2.10 / 0.12 = $17.50