Multiple Choice
Sales Company paid a $1.00 dividend per share last year and is expected to continue to pay out 40% of earnings as dividends for the foreseeable future.If the firm is expected to generate a 10% return on equity in the future, and if you require a 12% return on the stock, the value of the stock is
A) $17.67.
B) $13.00.
C) $16.67.
D) $18.67. g = 10% * 0.6 = 6%; P = 1 (1.06) /(.12 - .06) = $17.67.
Correct Answer:
Verified
Correct Answer:
Verified
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