Metasteel Limited Co. has a stable sales track record but does not expect to gro

Question

Metasteel Limited Co. has a stable sales track record but does not expect to grow in the next several years. Its last annual dividend was $5.75. If the required rate of return on similar investments is 18 percent, what is the current stock price?

You are interested in investing in a company that expects to grow steadily at an annual rate of 6 percent for the foreseeable future. The firm paid a dividend of $2.30 last year. If your required rate of return is 10 percent, what is the most you would be willing to pay for this stock? (Round to the nearest dollar.)

Metasteel Limited Co. has a stable sales track record but does not expect to grow in the next several years. Its last annual dividend was $5.75. If the required rate of return on similar investments is 18 percent, what is the current stock price? You are interested in investing in a company that expects to grow steadily at an annual rate of 6 percent for the foreseeable future. The firm paid a dividend of $2.30 last year. If your required rate of return is 10 percent, what is the most you would be willing to pay for this stock? (Round to the nearest dollar.)

Explanation / Answer

P[ART-1

CURRENT STOCK PRICE OF METASTEEL LIMITED CO. = 5.75/18%

                                                                                                        =$31.94

PART-2

MAXIMUM PRICE THAT SHOULD BE PAID = 2.3(1.06)/.10-.06

                                                                              =$60.95

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