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31-03-2020
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Kindzi Co. has preferred stock outstanding that is expected to pay an annual dividend of $3.34 every year in perpetuity. If the required return is 3.59 percent, what is the current stock price?

Respuesta :

Shahzaibfaraz Shahzaibfaraz

01-04-2020

Answer:

The current price of the stock is $93.036

Explanation:

The zero growth dividend model provided by the DDM will be used here to calculate the value of stock today. The stock's dividedn are just like a perpetuity. The value or pirce of a perpetuity is,

P0 = D / r

Where,

D is the dividend

r is the required rate of return

P0 = 3.34 / 0.0359

P0 = $93.036

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