antiques r us I AT&T; LTE 5:29 PM * 34% ezto.mheducation.com connect. Principles

Question

antiques r us I AT&T; LTE 5:29 PM * 34% ezto.mheducation.com connect. Principles of Finance Fall 2017 Homework 05-Ch 09 inst Question 2 (of 9 2 5.00 points Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $11.15, but management expects to reduce the payout by 6 percent per year, indefinitely. If you require a return of 12 percent on this stock, what will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Reterences Book&Resources; Worksheet Difficulty 2 Intermediate Section 9.1 The Present Value of Common Stock

Explanation / Answer

Current price=Dividend for next period/Required return-Growth rate)

=(11.15*0.94)/(0.12-(0.06)

=10.481/0.18

=$58.23(Approx)

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