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g The CI Corp. has just paid a cash dividend of $2 per share. If investors require 16% return from investments such as this and the dividend is expected to grow at a steady 8% per year, what is the current value of the stock

Respuesta :

Answer:

the current value of the stock is $27

Explanation:

The computation of the current value of the stock is shown below:

But before that first determine the following things

Expected dividend is

= $2 Ă— (1 + 8%)

= $2.16

And,  

Required return on investment (r) = 16%

Growth rate (g) = 8%

So,  

The current value of the stock is

= D1 Ă· (r-g)

= $2.16 Ă· (16% - 8%)

= $27

hence, the current value of the stock is $27

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