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Homework answers / question archive / The United Manufacturing Company has a marginal tax rate of 21 %
The United Manufacturing Company has a marginal tax rate of 21 %. The last dividend paid by United was $3.70.
The expected long-run growth rate is 3 percent. If investors require 8 percent rate of return, what is the current price of the stock (P0)?
Computation of Current Stock Price (P0):
Current Stock Price = Next Year Dividend/(Required Rate of Return - Growth Rate)
= $3.70*(1+3%)/(8%-3%)
= $3.81/5%
Current Stock Price = $76.22
