Question

Tresnan Brothers is expected to pay a $3.00 per share dividend at the end of the year (i.e., D1 = $3.00). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 13%. What is the stock's current value per share? Round your answer to two decimal places.

Answer 1

Tresnan Brothers Current stock value per share is $60

Step-by-step explanation:

Using the formula

Stock Price = D1 / (r - g)

Stock Price = $3 / (13%-8%)

Stock Price = $3 / 5%

Stock Price = $60