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A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 11.4%, what is the stock price? $16.28 $16.70 $17.13 $17.57 $18.01

Respuesta :

Answer:

$17.57

Explanation:

The computation of the stock price is shown below:

Stock price = Next year dividend ÷ (Required rate of return - growth rate)

where,

Next year dividend is

= $1 + $1 ×5.4%

= $1 + $5.4%

= $1.054

And, the required rate of return is 11.4%

And, the growth rate is 5.4%

So, the stock price is

= $1.054 ÷ (11.4% - 5.4%)

= $17.57

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