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Emmy​ Lou, Inc. has an expected dividend next year of​ $5.60 per​ share, a growth rate of dividends of 10​ percent, and a required return of 20 percent. The value of a share of Emmy​ Lou, Inc.'s common stock is​ ________.

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segehood

Answer:

$56

Explanation:

Given that

Dividend = 5.6

Required rate of return, k = 20%

Dividend growth rate, g = 10%

Recall that

V = D ÷ (K - g)

Thus,

V = 5.6 ÷ (0.20 - 0.10)

V = 5.6 ÷ 0.10

V = 56

V = $56

Therefore, value of share is $56

The value of a share of Emmy​ Lou, Inc.'s common stock is​ $56.

The Gordon constant growth dividend model would be used to determine the value of common stock.

Stock value = expected dividend / (r - g)

Where:

  • r = required return = 20%
  • g = growth rate = 10%

Stock value = $5.60 / (20% - 10%)

$5.60 / (0.2 - 0.1)

%5.60 / 0.1 = $56

To learn more about required return, please check: https://brainly.com/question/15904043

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