The last dividend on Spirex Corporation's common stock was $4

Finance Dec 28, 2020

The last dividend on Spirex Corporation's common stock was $4.0, and the expected growth rate is 10%. If you require a rate of return of 20%, what is the highest price you should be willing to pay for this stock? b) $44.00 $38.50 445.69 $40.00 c) e) $50.00 Bo? b?rak

Expert Solution

We will use Gordon Growth model here;

Price of stock = Dividend(1+growth)/(Required rate of return - Growth)

Price = $4(1+10%)/(20%-10%)

Price = $44

So the answer is Option A ($44.00)

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