Question

Harry Corporation just paid a dividend of $10.18 per share and dividends are expected to grow at a constant rate of 6 percent forever. If the required rate of return is 12 percent, what is a fair price for Harry Corporation's stocks today?

Answer 1

Answer:

Stock Price= $169.67

Explanation:

Giving the following information:

Dividen= $10.18

Growht rate (g)= 0.06

Rate of return (i)= 0.12

To calculate the price today, we need to use the following formula:

Stock Price= dividend / (i - g)

Stock Price= 10.18 / (0.12 - 0.06)

Stock Price= $169.67