Question

Burkhardt Corp. pays a constant $14.40 dividend on its stock. The company will maintain this dividend for the next 6 years and will then cease paying dividends forever. If the required return on this stock is 12 percent, what is the current share price

Answer 1

Current Price of Stock $59.20

Step-by-step explanation:

The computation of the current market price is shown below:

Particulars Time PVF at 12% Amount ( in $) PV ( in $)

Dividend 1 0.8929 14.40 12.86

Dividend 2 0.7972 14.40 11.48

Dividend 3 0.7118 14.40 10.25

Dividend 4 0.6355 14.40 9.15

Dividend 5 0.5674 14.40 8.17

Dividend 6 0.5066 14.40 7.30

Current Price of Stock $59.20