In response to the stock market's reaction to its dividend policy, the Nico's Toy Company has decided to increase its dividend payment at a rate of 4 percent per year
The firm's most recent dividend is $3.25 and the required rate of interest is 9 percent. What is the maximum you would be willing to pay for a share of the stock?
P = D1 / (r - g) = 3.25 × (1 + 0.04 ) / (0.09 - 0.04 ) = $67.60
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