A stock's current dividend is 6 and the required rate of return on this stock is 12%

Finance Jun 22, 2021

A stock's current dividend is 6 and the required rate of return on this stock is 12%. If the dividend growth rate is 9%, what should be the current stock price? * (2 Points)
O 216
O 218
O None of the answers
0 200

Expert Solution

Computation of Current Stock Price:

Current Stock Price = Next Year Dividend/(Required Rate of Return - Growth Rate)

= 6*(1+9%)/(12%-9%)

= 6.54/3%

Current Stock Price = 218

So, the correct option is 2nd "218". Current Stock Price is 218.

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