A stock is expected to pay a dividend of $0.75 at the end of the year.The required rate of return is r_s = 10.5%, and the expected constant growth rate is g = 6.4%.What is the stock's current price? A) $17.39 B) $17.84 C) $18.29 D) $18.75 E) $19.22

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Quizplus · Accepted Answer

The stock's current price can be calculated using the Gordon Growth Model (Dividend Discount Model): P = D1 / (rs - g) = $0.75 / (0.105 - 0.064) = $18.29.

A Stock Is Expected to Pay a Dividend of $0