A share just paid a dividend of $0.30. The dividend is expected to increase at an annual rate of 4% forever. If the required return is 10%, what is the fair value of this share today? a. $0.31 b. $5.50 c. $5.20 d. $3.12 e. $5

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 2P
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What is the fair value of this share today on these financial accounting question?

A share just paid a dividend of $0.30. The
dividend is expected to increase at an annual
rate of 4% forever. If the required return is 10%,
what is the fair value of this share today?
a. $0.31
b. $5.50
c. $5.20
d. $3.12
e. $5
Transcribed Image Text:A share just paid a dividend of $0.30. The dividend is expected to increase at an annual rate of 4% forever. If the required return is 10%, what is the fair value of this share today? a. $0.31 b. $5.50 c. $5.20 d. $3.12 e. $5
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