Question

Value a Constant Growth Stock Financial analysts forecast Best Buy Company (BBY) growth for the future to be 14.00 percent. Their recent dividend was $1.19. What is the value of their stock when the required rate of return is 15.43 percent

Answer 1

$94.87

Step-by-step explanation:

Value of stock = Dividend * (1 + Growth rate) / (Required rate - Growth rate)

Value of stock = $1.19 * (1 + 0.14) / (0.1543 - 0.14)

Value of stock = $1.19 * 1.14 / 0.0143

Value of stock = $1.3566 / 0.0143

Value of stock = 94.8671329

Value of stock = $94.87