ABC Corp for pays an initial dividend of $2 per share which rises by 5% a...

ABC Corp for pays an initial dividend of $2 per share which rises by 5% a year. The equity cost of capital for ABCamounts to 10%. On the basis of this information, ABC stock should be trading at:

	a.	$20
	b.	$50
	c.	$100
	d.	$40

Expert Solution

On the basis of this information, ABC stock should be trading at:

=D1/(r-g)

=2/(10%-5%)

=40

the above will be answer

jeff jeffy answered 2 years ago

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