Question

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock today. The dividends will grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on the stock, what is its current price?"

Answer 1

$31.2

Step-by-step explanation:

The price of the share of the Jackson-Timberlake Wardrobe Co. shall be determined through the following mentioned formula:

Price of share=[D(1+g)/(r-g)]

In the given question

D=dividend just paid by the company=$1.95

g=growth rate=4%

r=required rate of return=10.5%

Price of share=[$1.95(1+4%)/(10.5%-4%)]

=$31.2