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Whistle Stop pays a constant annual dividend of $4 on its stock. The company will maintain this dividend for the next 3 years and will then cease paying dividends forever. What is the current price per share if the required return on this stock is 15.6 percent

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abiolataiwo2015

Answer:

$9.04

Explanation:

Calculation for the current price per share

Using this formula

P0 = Annual dividend[1 − (1/1+Required return)]/ Required return

Let plug in the formula

P0=$4[(1- (1/1+0.156)]/.156

P0 = $4[1 − (1/1.1563)]/.156

P0 = $9.04

Therefore the current price per share will be $9.04

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