MindTap - Cengage Learning nment: Week 5 Homework Assignment Score: 0.00% Save S

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MindTap - Cengage Learning nment: Week 5 Homework Assignment Score: 0.00% Save Submit Assignment for Grading stions Problem 9.02 e Question 3 of 8 Check My Work (3 remaining) 9-5: Constant Growth Stocks Constant growth valuation Thomas Brothers is expected to pay a $3.2 per share dividend at the end of the year (that is, D1- $3.2). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 11%, what is the stock's current value per share? Round your answer to two decimal places ? O Check My Work (3 remaining)

Explanation / Answer

Expected Dividend, D1 = $3.20
Growth Rate, g = 8%
Required Return, rs = 11%

Current Value, P0 = D1 / (rs - g)
Current Value, P0 = $3.20 / (0.11 - 0.08)
Current Value, P0 = $3.20 / 0.03
Current Value, P0 = $106.67

So, current value of stock is $106.67 per share.

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