Boehm Incorporated is expected to pay a $1

Finance Oct 20, 2020

Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 16%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.

Expert Solution

Computation of the estimated value per share of Boehm's stock:-

Value of stock = D1 / (Required rate of return - Growth rate)

= $1.50 / (16% - 8%)

= $1.50 / 8%

= $18.75 Or 419

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