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ABC Online Merchant has a current stock price of $42.50. The company paid $1.34 in dividends this year, and the dividends are expected to grow at 3% per year. If an investor has a required rate of return
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ABC Online Merchant has a current stock price of $42.50. The company paid $1.34 in dividends this year, and the dividends are expected to grow at 3% per year. If an investor has a required rate of return of 5%, what is ABC worth to that investor

User Ivan Muzzolini
by
3.6k points

2 Answers

2 votes

Answer:

69.01

Step-by-step explanation:

User Popoi Menenet
by
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4 votes

The formula is to calculate stock price through dividend discount model is

Share price = Dividend/(rate of return - dividend growth rate)

=$1.34/(5%-3%)

=$67

User Snukker
by
3.9k points
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