Question

A common stock pays an annual dividend per share of $2.10. The market capitalization rate (required return on equity) is 10.0%. If the annual dividend is expected to remain at $2.10, what is the value of the stock

Answer 1

the value of the stock is $21

Step-by-step explanation:

The computation of the value of the stock is given below:

= Annual dividend per share ÷ required rate of return

= $2.10 ÷ 10%

= $21

Hence, the value of the stock is $21

We simply divided the annual dividend from the required rate of return so that the value of the stock could come