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Hudson Corporation will pay a dividend of $5.50 per share next year. The company pledges to increase its dividend by 7.30 percent per year indefinitely. If you require a return of 14.70 percent on your investment, how much will you pay for the company's stock today?

Respuesta :

Answer:

Present value of the stock will be $74.324

Explanation:

Dividend for the next year [tex]$5.50\ per\ share[/tex]

Growth rate = 7.30 % = 0.073

Required return [tex]Re=14.70%=0.147[/tex]

We have to find the present stock [tex]P_0[/tex]

We know that present value is given by

[tex]P_0=\frac{D_1}{Re-g}=\frac{5.50}{0.147-0.073}=$74.324[/tex]

So the present value of the stock will be $74.324

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