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Homework answers / question archive / You are considering investing in Babua Corporation, which is expected to pay divide- of $10 a share at the end of the fil ear
You are considering investing in Babua Corporation, which is expected to pay divide- of $10 a share at the end of the fil ear. Dividend is expected to grow at a constant rate g=5% and required rate of return is 6%. What is estimated current stock price. (round your answer to the nearest hundredth. have two digits after decimal place.) Answer:
Estimated current stock price will be calculated according to the dividend discounting model.
Share price of the company= (expected dividend)/(required rate of return - growth rate)
= (10)/(.06-.05)
= $ 1000.
Hence the price of the company is $ 1000.
