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Casino Inc. is expected to pay a dividend of $3 per share at the end of year-1 (D1) and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today

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abiolataiwo2015

Answer:

$25

Explanation:

Calculation to determine what is current value of the stock today

Using this formula

P0= Div1/(r - g)

Let plug in the formula

P0= (3/(0.18 - 0.06))

P0= $25

Therefore current value of the stock today is $25

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