What is the estimated value of a stock with a required rate of return of 12 percent,a projected constant growth rate of dividends of 7 percent and expected dividend of $2.50?
A)$60
B)$15
C)$150
D)$5

Question

Quizplus · Accepted Answer

The value of the stock can be calculated using the Gordon Growth Model: P = D / (r - g), where P is the price, D is the dividend, r is the required rate of return, and g is the growth rate. Substituting the given values: P = $2.50 / (0.12 - 0.07) = $50.

What Is the Estimated Value of a Stock with a Required