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Business & Finance
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Royal Bank common shares pay dividends annually. They just paid a $1.50 dividend. Stock holders require a return of 12%. Royal is expected to continue paying dividends that will grow at 3.5% per annum in perpetuity. What is the fair price of a share of Royal Bank stock?

Jul 15th, 2015

Thank you for the opportunity to help you with your question!

Stock price =1.5*(1+3.5/100)/(0.12-3.5/100) = 18.26

We get it by putting various values in constant growth formula.


Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 15th, 2015

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