Thomas Brothers is expected to pay a $0 50 per share dividend at the end of the year (i.e., D1 $0 50). The dividend is expected to grow at a

Question

Thomas Brothers is expected to pay a $0 50 per share dividend at the end of the year (i.e., D1 $0 50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the stock’s current value per share?

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Valentina 5 days 2021-10-08T11:41:48+00:00 1 Answer 0

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    2021-10-08T11:43:16+00:00

    Answer:

    $6.25

    Step-by-step explanation:

    The formula to calculate the stock current value per share is given below:

    Stock current value per share = (Expected dividend at the end of the year) ÷ (Required rate of return – growth rate)

    = ($0.50) ÷ (15% – 7%)

    = ($0.50) ÷ (8%)

    = $6.25

    Basically we used the stock current value formula that is presented above

    Hence, the stock current value per share is $6.25

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