Question

Fowler, Inc., just paid a dividend of $2.55 per share on its stock. The dividends are expected to grow at a constant rate of 3.9 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price

Answer 1

The current price of the stock is $40.76

Step-by-step explanation:

The computation of the current price is shown below:

Current price is

= Current year dividend ÷ (Required rate of return - growth rate)

= ($2.55 × (1 + 0.039) ÷ (10.4% - 3.9%)

= $2.6495 ÷ (0.104 - 0.039)

= $2.6495 ÷ 0.065

= $40.76

Hence, the current price of the stock is $40.76

We simply applied the above formula so that the correct value could come

And, the same is to be considered