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Return on Investment Business Finance

Business & Finance
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A company is expected to pay a dividend of $1.50 per share next year.  The dividends are expected to grow at 2.5% per year indefinitely.  If the required return on similar investments is 5%, what is the current price of the stock?

Apr 1st, 2015

Based on the dividend discount model, the current stock price is $60.00. The formula is as follows: Price of stock = Dividend per share / (Discount Rate - Dividend Growth Rate). Entering our values into the dividend discount model gives us: $1.50/(5% - 2.5%) = $60.00.

Value of Stock.xlsx

Apr 1st, 2015

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