11:41 a mathxl.com Principles of Business Finance Tylia Towson 11/11 Homework: C
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Question
11:41 a mathxl.com Principles of Business Finance Tylia Towson 11/11 Homework: Chapter 10 Homework HW Score: 12 core: O of 1 pt 10-5 (similar to) (Common stock valuation) The common stock of NCP paid $1.35 in dividends last year. Dividends are expected to grow at an annual rate of 5.0 2 of 8 (1 complete) indefinite number of years. a. If your required rate of return is 7.20 percent, what is the value of the stock for you? b. Should you make the investment? a. If your required rate of return is 7.20 percent, the value of the stock for you is S (Round to the nearest cent.)Explanation / Answer
1) Calculation of Value of stock :
Terminal value = $1.35*(1.05) / (0.072 - 0.05)
= $1.4175 / 0.022
= $64.43
Value of stock today = $64.43 / 1.072
= $60.10
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