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4 June, 09:39

Dragon express inc. just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever. if the required return on the stock investment is 14%, what should be the price of the stock today.

a. $11.21

b. $17.44

c. $25.37

d. $18.32

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Answers (1)
  1. 4 June, 10:02
    0
    To solve this problem, we will use a valuation method named income valuation includes discounting of the profits the stock will carry to the stockholder in the probable future, and a final value on disposal.

    Solution:

    1.57 (1.05) / (.14 -.05)

    = 18.32. the answer is letter d.
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Home » Business » Dragon express inc. just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever. if the required return on the stock investment is 14%, what should be the price of the stock today. a. $11.21 b. $17.44 c. $25.37 d.
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