what is the price today (in dollars and cents) of a stock whose dividend per share is currently $1.80 and who expects to pay this same dividend per share at the end of each future year forever? that is, the assumption is that the current dividend per share will never change. the stock's required rate of return is 7.25%.

Question

21-10-2022
Business

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what is the price today (in dollars and cents) of a stock whose dividend per share is currently $1.80 and who expects to pay this same dividend per share at the end of each future year forever? that is, the assumption is that the current dividend per share will never change. the stock's required rate of return is 7.25%.

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ANKITANAND ANKITANAND · Answer 1 · 2022-10-27T08:38:30+02:00

The current price of the stock would be $24.82

What is stock?
A stock, usually referred to as equity, is a type of investment that denotes ownership in a portion of the issuing company. Shares, also known as units of stock, entitle its owners to a share of the company's assets and income in proportion to the number of shares they possess.

Most individual investors' portfolios are built on stocks, which are mostly bought and sold on stock exchanges. Government standards designed to shield investors from dishonest tactics must be followed during stock trades. In order to raise money to run their operations, corporations issue stock, and the holder of that shares, known as a shareholder, may be entitled to some of the company's assets and earnings.

Calculate the price today as follows:
Price today = dividend / Required rate of return
Price today = $1.80 / 7.25%
Price today = $24.82

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