Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 12 percent. Safeco’s recent dividend was $1.60.

What is the value of Safeco stock when the required return is 14 percent? (Round your answer to 2 decimal places.)

In order to determine the value of the stock, the constant dividend growth model would be used. The constant dividend model postulates that the value of a stock is a function of the required return, the growth rate and dividend.

Value of the stock = [dividend x (1 + g)] / (r - g)

Value of the stock = [1.60 x (1.12)] / (0.14 - 0.12)

Value of the stock = 1.792 / 0.02

Value of the stock = $89.60

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Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 12 percent. Safeco’s recent dividend was $1.60. What is the value of Safeco stock when the required return is 14 percent? (Round your answer to 2 decimal places.)

Answer :

What is the value of the stock?

Other Questions

Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 12 percent. Safeco’s recent dividend was $1.60.

What is the value of Safeco stock when the required return is 14 percent? (Round your answer to 2 decimal places.)