Answer:
The price should be P0 = $34.56
Explanation:
The value or price of a stock today can be whose dividend growth is zero can be calculated using the zero growth model of DDM. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = Dividend / r
Where,
- r is the required rate of return
P0 = 4.32 / 0.125
P0 = $34.56
