contestada

Gilmore, Inc., just paid a dividend of $2.35 per share on its stock. The dividends are expected to grow at a constant rate of 4.1 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock, what is the current price

Respuesta :

ajeigbeibraheem

Answer:

$38.89

Step-by-step explanation:

Given that:

Gilmore, Inc., just paid a dividend ( D₀) of $2.35 per share on its stock

The dividends are expected to grow at a constant rate (r) of 4.1 percent per year = 0.041

SO; if Gilmore, Inc., is requesting for a return of 10.4 percent on this stock; the current price is calculated as follows:

P₀= D₁ / (r - g)

P₀ = D₀×(1+g) / (r-g)

P₀ = $2.35 × (1+0.041) / (0.104 - 0.041)

P₀ = $2.45 / 0.063

P₀ = $38.89

Thus, the current price = $38.89

anthougo

Answer:

The current price of the Gilmore, Inc. stock is $38.89 per share.

Data and Calculations:

Dividend per share = $2.35

Expected constant growth rate = 4.1% per year

Required rate of return = 10.4%

The current stock price is given as P₀ = D₁ / (r - g)

Where P₀ = current price

D₁ = current year's dividend per share

D₀ = last year's dividend per share

g = growth

and r = required rate of return

P₀ = D₀ / (r-g)

P₀ = $2.35 × (1+0.041) / (10.4% - 4.1%)

P₀ = $2.45 / 6.3%

P₀ = $38.89

Thus, the current price of the Gilmore, Inc. stock is $38.89 per share.

Learn more about determining the stock price using the dividend growth model here: https://brainly.com/question/25801301

Otras preguntas