Question

Summit Systems will pay a dividend of this year. If you expect​ Summit's dividend to grow by per​ year, what is its price per share if the​ firm's equity cost of capital is ​?

Answer 1

Answer: $30

Step-by-step explanation:

With the details given in the question, the Gordon Growth Model can be used to calculate the price per share.

The formula is;

Price per share = Next Dividend / (Required return - growth rate)

= 1.50 / (11% - 6%)

= 1.50/5%

= $30