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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 ​?
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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 ​?

User Riccardo Neri
by
4.8k points

1 Answer

3 votes

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

User Mirronelli
by
4.5k points
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