Ken Williams Venture's required a rate of returnis 11.4%, and a constant growth rate of 5.4%....

Ken Williams Venture's required a rate of returnis 11.4%, and a constant growth rate of 5.4%. the company just paid a dividend of $1. what is the current stock price

Expert Solution

Dividend just paid (D0) =1

constant growth rate (g) = 5.4%

D1 = D0*(1+g)

=1*(1+5.4%)

=1.054

required return (ke) = 11.4%

price of stock as per constant growth model = D1/(ke-g)

=1.054/(11.4%-5.4%)

=17.56666667

so current price of stock is $17.57

jeff jeffy answered 2 years ago

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