Homework Help: Finance

Posted by mark on Saturday, September 11, 2010 at 8:35pm.

Royal Cup’s last dividend was $ 1.00 per share and dividends are expected to grow at a rate of 6%. What is the current value of a share of this stock to an investor who requires a 10 percent rate of return?

Finance -- incomplete - Ms. Sue, Saturday, September 11, 2010 at 8:39pm
That depends upon the price of the stock. A 10% rate of return on a stock selling for $10 would be $1.00. A 10% rate on a stock selling for $100 would $10.

It also depends upon whether the stock price increases.

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