Answered

bensen co. paid a dividend of $5.25 on its common stock yesterday. the company's dividends are expected to grow at a constant rate of 8.5% indefinitely. if the required rate of return on this stock is 15.5%, compute the current value per share of bensen co. stock. group of answer choices $43.90 $56.23 $81.38 $76.43



Answer :

AnjaliP102

$81 .43 .

Since the share's actual value exceeds its current market price, I would buy it.

Solution:

  • The market value per share is the price at which investors are willing to purchase common stocks and represents the current value of a company's shares. The market value is prospective and takes into account a company's potential for future financial success.

Current dividend - growth rate = expected dividend in perpetuity.

Dividend at this time = $5.25.

8.5% = growth rate

Dividend anticipated = $5.25*(1+8.5%)

Dividend anticipated = $5.70

We use stock price formula to calculate the actual value of the stock:

price = anticipated dividend (expected return-growth rate)

price=$5.70/(15.5%-8.5%)

price=$81.43

Since the stock is actually trading below its true value of $81.43, the decision to buy it at $78.50 would be a welcome one.

To learn more about value per share refer to :

https://brainly.com/question/1166179

#SPJ4

tutorconsortium127

The change in an investment's value expressed as a percentage is known as the yearly rate of return.

The stock is actually trading below its true value of $81.43, the decision to buy it at $78.50 would be a welcome one.

What is meant by rate of return?

The change in an investment's value expressed as a percentage is known as the yearly rate of return. An investment's return is a profit in finance. It includes any change in the value of the investment and/or cash flows that the investor receives from that investment, such as interest payments, coupons, cash dividends, stock dividends, or the payoff from a derivative or structured product.

Given: Dividend at this time = $5.25.

8.5% = growth rate

Dividend anticipated = $5.25×(1+8.5%)

Dividend anticipated = $5.70

We use stock price formula to calculate the actual value of the stock:

price = anticipated dividend (expected return-growth rate)

price = $5.70/(15.5%-8.5%)

price = $81.43

Since the stock is actually trading below its true value of $81.43, the decision to buy it at $78.50 would be a welcome one.

To learn more about rate of return refer to :

https://brainly.com/question/3578105

#SPJ4

Other Questions