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22 July, 12:30

Kindzi Co. has preferred stock outstanding that is expected to pay an annual dividend of $3.34 every year in perpetuity. If the required return is 3.59 percent, what is the current stock price?

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  1. 22 July, 12:51
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    The current price of the stock is $93.036

    Explanation:

    The zero growth dividend model provided by the DDM will be used here to calculate the value of stock today. The stock's dividedn are just like a perpetuity. The value or pirce of a perpetuity is,

    P0 = D / r

    Where,

    D is the dividend

    r is the required rate of return

    P0 = 3.34 / 0.0359

    P0 = $93.036
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