Question

Seidel Inc. is expected to pay a dividend next year of $1.53. You also expect Seidel to increase its dividend payout by 4% per year. If you require a 12% return to invest in Seidel what is the maximum price you would be willing to pay for the stock?

Answer 1

Answer: $19.13

Explanation:

The easiest way to calculate the maximum price is by making use of the formulae Vo= Div1/(r-g) =1.53/(.12-.04)

Therefore the maximum price you would be willing to pay for the stock is $19.13