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A company just paid a dividend of $1.53 per share and you expect the dividend to...

A company just paid a dividend of $1.53 per share and you expect the dividend to grow at a constant rate of 5.6% per year indefinitely into the future. If the required rate of return is 13.4% per year, what would be a fair price for this stock today? (Answer to the nearest penny per share.)

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Expert Solution

Fair price = D0(1 + g) / (r - g)

Fair price = $1.53(1 + 0.056) / (0.134 - 0.056)

Fair price = $20.71

jeff jeffy answered 2 years ago
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