If a Stock's Dividend Is Expected to Grow at a Constant

question 99

Multiple Choice

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $2.50 a share,and you have an alternative investment of equal risk that will earn a 8 percent rate of return,what would you be willing to pay per share for this stock today?

• A)$2.86
• B)$33.13
• C)$132.50
• D)$200.00