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Take Time Corporation will pay a dividend of $4.10 per share next year. The company pledges to increase its dividend by 6 percent per year, indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company's stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price $

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Answer:

So the current stock price will be $102.5

Explanation:

We have given that next year dividend [tex]D_1=$4.10[/tex]

Growth rate = 6 % = 0.06

Required return Ke = 10% = 0.01

We have to find the company current stock price

We know that current stock price is given by

[tex]P_0=\frac{D_1}{Ke-g}=\frac{4.10}{0.1-0.06}=$102.5[/tex]

So the current stock price will be $102.5

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