maribelvsarote7794 maribelvsarote7794
  • 25-12-2019
  • Business
contestada

How much should you pay for a share of stock that offers a constant-growth rate of 10%, requires a 16% rate of return, and is expected to sell for $50 one year from now?

Respuesta :

Karabo99
Karabo99 Karabo99
  • 26-12-2019

Answer:

The you should expect to pay $45.45

Explanation:

Paticulars                    Amount

D2 = (ke-g)P1  

D2 = (16% - 10%)*50  

D2 = (6%)*50  

D2 = 3  

D1 = 3/1.10                    2.7273

P0 =D1/(ke - g)  

P0 =2.7273/(16%-10%)  

P0 =2.7273/6%  

P0 = 45.45

Therefore, The you should expect to pay $45.45

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