Question

Casino Inc. expects to pay a dividend of $6 per share at the end of year 1 (Div1) and these dividends are expected to grow at a constant rate of 6 percent per year forever. If the required rate of return on the stock is 20 percent, what is the current value of the stock today?

Answer 1

The current value of the stock today is $42.90

Step-by-step explanation:

P1 = $6 / 0.20 - 0.06

P1 = $6 / 0.14

P1 = $42.8571

P1 = $42.90