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Tex paper’s stock paid a dividend of $3 last year. Based on its recent performance and...

Tex paper’s stock paid a dividend of $3 last year. Based on its recent performance and future outlook, investors are expecting Tex’s earnings and dividends to decline at a constant rate of 3% per year. If Tex’s cost of equity is 6%, the value of a Tex stock is closest to? $10.42 $29.67 $32.33 $22.62

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Expert Solution

Value of stock = D0(1 + g) / (r - g)

Value of stock = $3[1 + (-0.03)] / [0.06 - (-0.03)]

Value of stock = $32.33

jeff jeffy answered 2 years ago
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