Consider the Constant Growth DDM

Consider the constant growth DDM.In a non-inflationary environment,KD Picture Frame Company is expected to pay a dividend of $2.60 in the coming year,the growth rate of dividends is expected to be 0%,and the required return on the stock will be 8%.If the inflation rate is 4%,KD Picture Frame Company is expected to pay a dividend of $2.70 in the coming year,the dividend growth rate will be 4%,and the required return on the stock will be 12.32%.In the inflationary environment with inflation at 4%,a share of KD Picture Frame's stock should be worth ________.

A) $21.10
B) $31.25
C) $32.45
D) $62.50
E) none of these

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free