Sufficiently general to handle the case of zero growth stock

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Reference no: EM131535112

Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $2.00. It expects to grow at a constant rate of 4% per year. If investors require a 12% return on equity, what is the current price of Hubbard's common stock? Round your answer to the nearest cent. Do not round intermediate calculations.

$ per share

Zero Growth Stocks:

The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is expected to remain constant over time. In this situation, the equation is:

P0=D/rs

Reference no: EM131535112

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