Suppose the dividend of a stock today is 6%. The interest rate is 5% and that dividends will grow forever at the rate of 4%. What is the fundamental value (present value) of this stock? If the current market price of this is 500, should you buy or sell the stock?
Suppose the dividend of a stock today is 6%. The interest rate is 5% and that dividends will grow forever at the rate of 4%. What is the fundamental value (present value) of this stock? If the current market price of this is 500, should you buy or sell the stock?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Suppose the dividend of a stock today is 6%. The interest rate is 5% and that dividends will
grow forever at the rate of 4%. What is the fundamental value (present value) of this stock?
If the current market price of this is 500, should you buy or sell the stock?
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