Using the Gordon growth formula,if D₁ is $2.00,k_e is 12% or 0.12,and g is 10% or 0.10,then the current stock price is A)$20. B)$50. C)$100. D)$150.

Question

Quizplus · Accepted Answer

Using the Gordon growth formula: Current Stock Price = (Dividends per Share / (Cost of Equity - Growth Rate)) Current Stock Price = (D₁ / (k_e - g)) Current Stock Price = ($2.00 / (0.12 - 0.10)) Current Stock Price = ($2.00 / 0.02) Current Stock Price = $100. Therefore, the current stock price is $100 and the best choice is (C).

Using the Gordon Growth Formula,if D1 Is $2

Using the Gordon Growth Formula,if D₁ Is $2