Question

Emmy Lucent, Inc. has an expected dividend next year of $5.60 per share, a growth rate of dividends of 10 percent, and a required return of 20 percent. The value of a share of Emmy Lucent, Inc.'s common stock is ________.

Answer 1

Value of Stock = Dividend next year / (Required return - Growth rate)

Value of Stock = $5.60 / (0.20 - 0.10) = $56

Therefore, the value of a share of Emmy Lucent, Inc.'s common stock is $56.