Main Street Antiques is planning on paying an annual dividend of $2.20 per share next year. The company is slowly downsizing and is decreasing its dividend by 3 percent annually. What is the current value of this stock at a discount rate of 8 percent?

Price of the share is $44

Explanation:

Dividend Valuation method is used to value the stock price of a company based on the dividend paid, its growth rate and rate of return. The price is calculated by calculating present value of future dividend payment.

As per given data

Dividend = $2.2

Growth rate = 3%

Discount rate = 8%

Formula to calculate the value of stock

Price = Dividend / (Rate or return - growth rate)

Price = $2.2 / (8% - 3%)

Price = $2.2 / 0.08 - 0.03)

Price = $2.2 / 0.05

Price = $44