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Question

what is the value of a stock that expects to pay a $1.00 dividend next year, and then increase the dividend at a rate of 4% per year, indefinitely? assume a 7% cost of capital. show your work. (5 points)

Answer

The amount of value given as consideration for the sale of a particular thing, also known as price, will be $34.67 for this security. To calculate the value of the stock, we can use the constant dividend growth model, which takes into account the number of dividends ($1.00), the growth rate (4% per year), and the cost of equity (7%). Applying the formula, we get a value of $34.67, which is the price for this security. For further information on this topic, please visit brainly.com/question/24231117 #SPJ4.