help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / The Black Forest Cake Company just paid an annual dividend of $5

The Black Forest Cake Company just paid an annual dividend of $5

Finance

The Black Forest Cake Company just paid an annual dividend of $5.27. If you expect a constant growth rate of 5.72 percent and have a required rate of return of 11.43 percent, what is the current stock price according to the constant growth dividend model?

 

Round the answer to two decimal places.

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Computation of Current Stock Price according to the constant growth dividend model:

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

= $5.27*(1+5.72%)/(11.43%-5.72%)

= $5.57/5.71%

Current Stock Price = $97.57

So, Current Stock Price according to the constant growth dividend model is $97.57

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)