Using the Gordon growth formula,if D1 is $1.00,ke is 10% or 0.10,and g is 5% or 0.05,then the current stock price is
A)$10.
B)$20.
C)$30.
D)$40.

Question

Quizplus · Accepted Answer

The Gordon growth formula is P0 = D1 / (ke - g), where P0 is the current stock price, D1 is the expected dividend in the next period, ke is the required rate of return, and g is the growth rate of dividends. Plugging in the values given: P0 = $1.00 / (0.10 - 0.05) = $1.00 / 0.05 = $20.

Using the Gordon Growth Formula,if D1 Is $1