The stock of Robotic Atlanta Inc. is trading at $37.01 per share. In the past, the firm has paid a constant dividend of $ 5.90 per share and it has just paid an annual dividend (i.e., DO = 5.90). However, the company will announce today new investments that the market did not know about. It is expected that with these new investments, the dividends will grow at 5.4 % forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement? Calculate your answer to the nearest penny, do not use the $ sign in your answer.

The stock of Robotic Atlanta Inc. is trading at $37.01 per share. In the past, the firm has paid a constant dividend of $ 5.90 per share and it has just paid an annual dividend (i.e., DO = 5.90). However, the company will announce today new investments that the market did not know about. It is expected that with these new investments, the dividends will grow at 5.4 % forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement? Calculate your answer to the nearest penny, do not use the $ sign in your answer.

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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