Question

Find the value of a stock that is expected to pay a dividend next year of 2.20 assuming you are required return is 12 percent.

Answer 1

$18.33

Step-by-step explanation:

Given that

Expected dividend pay in next year = $2.20

Required rate of return = 12%

The formula and the computation of the value of a stock are shown below:

Value of a stock = Expected dividend pay in next year ÷ required rate of return

= $2.20 ÷ 12%

= $18.33

Simply dividing the Expected dividend pay in next year by the required rate of return to get the value of a stock.