Question

Jenson Co. just paid a $10.18 dividend. The company's dividends are expected to grow at a consistent rate of 6% indefinitely. Given a required rate of return of 12%, what should be the price of Jenson's stock

Answer 1

Answer:

$179.85

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

10.18 (1,06) / (0.12 - 0.06) = 179.85