what is the current price of the stock?​

Mathematics
Tutor: None Selected Time limit: 1 Day

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


Please let me know if you need any clarification. I'm always happy to answer your questions.
Nov 18th, 2015

Did you know? You can earn $20 for every friend you invite to Studypool!
Click here to
Refer a Friend
...
Nov 18th, 2015
...
Nov 18th, 2015
Dec 3rd, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer