contestada

National Trucking has paid an annual dividend of $1 per share on its common stock for the past 15 years and is expected to continue paying a dollar a share long into the future. Given this, one share of the firm's stock is ___________.a. Basically worthless as it offers no growth potential.
b. Equal in value to the present value of $1 paid one year from today.
c. Priced the same as a $1 perpetuity.
d. Valued at an assumed growth rate of 1 percent.
e. Worth $1 a share in the current market.

Respuesta :

hyderali230

Answer:

c. Priced the same as a $1 perpetuity.

Explanation:

The payment of dividend of $1 up to long into the future is the perpetuity because a constant payment of $1 is being made for indefinite period of time. As the dividend is stable there is no growth in this, so the price of share can be calculated as the value of an perpetuity. Formula of perpetuity is as follow:

Value of Perpetuity = Cash flow / required rate of return

Price of share = Dividend / required rate of return

Otras preguntas