Question

mvk industries just paid a dividend of $1.70 that is expected to grow at 45% per year for the next three years at a constant rate of 5.5%.If the required return on the stock is 12%, what should be the current price of the stock> g'

Answer 1

Answer:

$27.59

Explanation:

Calculation to determine what should be the current price of the stock

Current price of common stock=(1.70*(1+5.5%))/(12%-5.5%)

Current price of common stock=(1.70*1.055)/0.065

Current price of common stock=1.7935/0.065

Current price of common stock=$27.59

Therefore what should be the current price of the stock is $27.59