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Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.20 a share. Secondly, the company announced that all future dividends will increase by 5% annually. What is the maximum amount you should pay to purchase a share of Angelina's stock if your goal is to earn a 10% rate of return

Sagot :

Answer:

44

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

2.2 / 0.1 - 0.05 = 44

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