Question

Caterpillar Inc. (CAT) pays an annual dividend of $4.45. The company is expected to continue paying this dividend with no future growth in dividends. Investors require 11% rate of return on this investment. What is the current stock value of CAT

Answer 1

$40.45

Step-by-step explanation:

The current stock value of CAT is computed as below

Current stock value = Annual dividend / Rate of return

Current stock value = $4.45 / 11%

Current stock value = $4.45 / 0.11

Current stock value = $40.454546

Current stock value = $40.45

So, the current stock value of CAT is $40.45.