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?
Based on expected dividend price $1.50 and growth rate of 2.5%, in order to earn 5% required rate of return the most you could pay for this stock would be $61.50 per share.
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