Kevin Hall is interested in buying the stock of First National Bank. While the bank's management...

Kevin Hall is interested in buying the stock of First National Bank. While the bank's management expects no growth in the near future, Kevin is attracted by the dividend income. Last year the bank paid a dividend of $6.12. If Kevin requires a return of 18.0 percent on such stocks, what is the maximum price he should be willing to pay for a share of the bank’s stock?

Expert Solution

Maximum price is willing to pay =

Formula = dividend/required rate of return

That is = 6.12/18% = $ 34 per share

jeff jeffy answered 2 years ago

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Kevin Hall is interested in buying the stock of First National Bank. While the bank's management...

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