Question

Sunland, Inc., paid a dividend of $3.69 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 12.0 percent, what is the current value of the stock

Answer 1

$30.75

Step-by-step explanation:

We can make dividend in year n be Dn

Given that Do = $3.69

but,

Growth rate of dividend = g = o

Therefore,

D1 = $3.69

Required rate of return = r = 12%

By using Gordon 's growth model,

Price of stock

= Po = D1 / ( r - g )

= 3.69 / (0.12 - 0)

= $30.75

The current vale of the stock is $30.75