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Crane, Inc., paid a dividend of $3.52 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 16.0 percent, what is the
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Crane, Inc., paid a dividend of $3.52 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 16.0 percent, what is the current value of the stock

User Laurene
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2 votes

Answer:

$ 22.00

Step-by-step explanation:

The current value of the stock is the price at which the stock is selling for currently. It is usually the present value of cash inflows expected by investors in the stock.

In this stance, we have a stock that pays a constant dividend in perpetuity, in other words, its present value is the present value of the amount receivable forever.

The present value of stock=dividend per share/required rate of return

dividend per share is $3.52

required rate of return is 16.0%

present value of stock=$3.52/16.0%=$ 22.00

User Zgore
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