Question
In: Finance
Carmichael, Inc.’s most recent dividend was $3.25 per share. The company announced that all future dividends...
Carmichael, Inc.’s most recent dividend was $3.25 per share. The company announced that all future dividends will increase by 3.5 percent annually. What is the maximum amount you should pay to purchase a share of Carmichael’s stock if your goal is to earn an 11 percent rate of return?
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Expert Solution
P0 = (D0 * (1+g)) / (ke - g)
= ($3.25 * (1 + 3.5%)) / (11% - 3.5%)
= $3.36375 / 7.5%
= $44.85
The maximum amount you should pay to purchase a share of Carmichael’s stock = $44.85
jeff jeffy answered 2 years agoRelated Solutions
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