Time remaining:
Po = Do(1 g) = D1; Po = 0.75(1 0.04) =P1 please calculate

label Algebra
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 stock is anticipated to pay a dividend of $1.50 at the end of the year. The anticipated constant growth rate is 3 percent, and the required rate of return is 8.5 percent. The current stock price is $

Apr 25th, 2015

P0=D0(1+g)/r-g
P0=$1.50(1+0.03)/8.5-0.03
P0=$0.18
  • P0 = the stock price at time 0,
  • D0 = the current dividend,
  • D1 = the next dividend (i.e., at time 1),
  • g = the growth rate in dividends, and
  • r = the required return on the stock, and
  • g < r.     

Apr 25th, 2015

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Apr 25th, 2015
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Apr 25th, 2015
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