Pacific Corporation just paid an annual dividend of $2.00 per share on its common stock. Dividends are expected to grow at an annual rate of 4% hereafter. If investors require a rate of return of 9% on Pacificstock, what is the most they should be willing to pay today for a share of this stock?O A. $57.93O B. $41.60O c. $40.00O D. $55.57

In this we need to use constant growth model for the prices of equity.

Pacific Corporation just paid an annual dividend of $2.00 per share on its common stock. Dividends stock, what is the most they should be willing to pay today for a share of this stock? O A. $57.93 O B. $41.60 Oc. $40.00 O D. $55.57

Pacific Corporation just paid an annual dividend of $2.00 per share on its common stock. Dividends stock, what is the most they should be willing to pay today for a share of this stock? O A. $57.93 O B. $41.60 Oc. $40.00 O D. $55.57

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Pacific Corporation just paid an annual dividend of $2.00 per share on its common stock. Dividends are expected to grow at an annual rate of 4% hereafter. If investors require a rate of return of 9% on Pacific
stock, what is the most they should be willing to pay today for a share of this stock?
O A. $57.93
O B. $41.60
O c. $40.00
O D. $55.57

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