Question

Suppose NoGro, Inc. has just issued a dividend of $2.90 per share. Subsequent dividends will remain at $2.90 indefinitely. Returns on the stock of firms like NoGro are currently running 15%. What is the value of one share of stock?

Answer 1

Value of one share will be $19.33

Step-by-step explanation:

We have given dividend every year = $2.90

Required rate of return = 15 %

We have to find the value of one share

Value of one share will be equal to ratio of dividend per year to the required rate of return

So value of one share
`=(2.90)/(0.15)=19.13`

So value of one share will be $19.33