Question

What is the market value of one share of Beaver Business Inc. stock if the company just paid an annual dividend of $6.16, the dividends will increase by 3.6 percent annually, and you require a return of 7.7 percent

Answer 1

Based on the dividends, the growth rate, and the return required, the price for Beaver Business's stock is $155.65

What is the market price of Beaver Business's stock?

This can be found by the formula:
= (Current dividend x ( 1 + growth)) / (Required return - Growth rate)

Solving gives;

= (6.16 x 1.036) / (7.7% - 3.6%)

= $155.65

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