Antiques R Us is a mature manufacturing firm. The company just paid a dividend o

Question

Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.65, but management expects to reduce the pay out by 4 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a share today? (Round your answer to 2 decimal places. (e.g., 32.16))

Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.65, but management expects to reduce the pay out by 4 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a share today? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

P0 = D0 (1 + g) / (R-g)

            P0 = $9.65(1- .04) / [(.12- (-.04)]

            P0 = $9.26 / .16

            P0 = $57.88

  Current share price

$   

  Current share price

$   

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