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Martell Mining Company’s ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company’s earnings and dividends are declining at the constant rate of 5% per year. If D0 5 and rs 15%, what is the value of Martell Mining’s stock?

Respuesta :

Answer:

the value of Martell Mining’s stock is 23.75

Explanation:

given data

constant growth rate g = 5% per year

D0 =  5

rs = 15%

solution

we get here value of Martell Mining stock that is

value of  stock  =  [tex]\frac{D0 \times (1+g)}{rs - g}[/tex]   ......................1

put here value and we get

value of  stock  =  [tex]\frac{5 \times (1+(-0.05))}{0.15 - (-0.05)}[/tex]  

value of  stock  =  23.75

so here the value of Martell Mining’s stock is 23.75

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