Tina's Medical Equipment Company paid $2.25 common stock dividend last year. The company's policy is to allow its dividend to grow at 5 percent per year indefinitely. What is the value of the stock if the required rate of return is 8 percent?
What will be an ideal response?
P = D1 / (r - g) = $2.25 × (1 + 0.05 ) / (0.08 - 0.05 ) = $78.75
Business
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