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Thomas Brothers is expected to pay a $0 50 per share dividend at the end of the year (i.e., D1 $0 50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the stock’s current value per share?

Respuesta :

Answer:

$6.25

Step-by-step explanation:

The formula to calculate the stock current value per share is given below:

Stock current value per share = (Expected dividend at the end of the year) ÷ (Required rate of return - growth rate)

= ($0.50) ÷ (15% - 7%)

= ($0.50) ÷ (8%)

= $6.25

Basically we used the stock current value formula that is presented above

Hence, the stock current value per share is $6.25

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