Answer to Question #57391 in Economics of Enterprise for klaudia
Question #57391
If a stock is expected to pay a dividend of $50 for the current year, what is the approximate present value of this stock, given at discount rate of 6% and a dividend growth rate of 4%?
Expert's answer
The formula for the present value of a stock with constant growth is the estimated dividends to be paid divided by the difference between the required rate of return and the growth rate.
If a stock is expected to pay a dividend of $50 for the current year, then the approximate PV of this stock (discount rate of 6% and a dividend growth rate of 4%) is:
PV = 50/(0.06 - 0.04) = $2,500.
If a stock is expected to pay a dividend of $50 for the current year, then the approximate PV of this stock (discount rate of 6% and a dividend growth rate of 4%) is:
PV = 50/(0.06 - 0.04) = $2,500.
Need a fast expert's response?
Submit orderand get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!
Ask Your question
If you’re a student who is stuck on an assignment or project and you literally have no one to turn to, AssignmentExpert can help you. They managed to get me through my summer semester and for that I am very grateful! 100/100 on my final project! If you think this is a scam, IT IS NOT. Everything is so easy and AssignmentExpert is so helpful! And not to mention they do original work every time! For my final project I got a 10% similarity on TurnItIn!
#211113 on Aug 2018
#211113 on Aug 2018 
Comments
Leave a comment