what is the current price of the stock?​

label Mathematics
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

Boomer Products, Inc. manufactures �no
-
inhale� cigarettes. As their target customers age
and pass on, sales of the product are expected to decline. Thus, demographics suggest
that earnings and dividends will decline at a rate of 5% annually forever. The firm just
paid a dividend of $4; given a required return is 10%, what is
the current price
of the
stock?

Nov 18th, 2015

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

Price = 4*(1-.05) / (.10 + .05)

= 25.33


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Nov 18th, 2015

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