Question #114160

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.05 next year. The growth rate in dividends for all three companies is 6 percent. The required return for each company’s stock is 9 percent, 12 percent, and 15 percent, respectively. What is the stock price for each company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Expert's answer

according to the model of Gordon:

"P=\\frac{d}{r-g}"

1."P=\\frac{3.05}{9-6}=101.7"

2."P=\\frac{3.05}{12-6}=50.8"

3."P=\\frac{3.05}{15-6}=33.9"

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