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Investors require a 10.80% rate of return on Levine Company'sstock. What is its value if...

Investors require a 10.80% rate of return on Levine Company's stock. What is its value if the previous dividend was $1.30 and investors expect dividends to grow at a constant annual rate of –6.10%?

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Expert Solution

According to the gordon growth model,

V0 = D0(1+G)/Ke-g

V0 = $1.30(1-0.061)/0.1080 + 0.061

V0 = $1.2207/0.1690

V0 = $7.2231

jeff jeffy answered 2 years ago
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