LB Moore has 40,000 shares of common stock outstanding. The firm just paid an an

Question

LB Moore has 40,000 shares of common stock outstanding. The firm just paid an annual dividend of $2.70 per share on this stock. The market rate of return is 19.50 percent. What will one share of this stock be worth one year from now if the dividends grow by 6.00 percent annually?

LB Moore has 40,000 shares of common stock outstanding. The firm just paid an annual dividend of $2.70 per share on this stock. The market rate of return is 19.50 percent. What will one share of this stock be worth one year from now if the dividends grow by 6.00 percent annually?

Explanation / Answer

Cost of share = D1/(Ke - g) = $2.70 x (1+0.06)/(19.5 - 6) = (2.862/13.5%) = $21.20

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.