CFA Practice Question
An analyst gathered the following information about a common stock:
Risk-free rate 7%
Risk premium for this stock 4%
Annual dividend per share $2.10
Risk-free rate 7%
Risk premium for this stock 4%
If the annual dividend is expected to remain at $2.10, the value of the stock is closest to:
A. 52.50
B. 19.09
C. 30
Explanation: 2.10/(0.07 + 0.04) = 19.09.
User Contributed Comments 2
| User | Comment |
|---|---|
| safash | i thot its 2.1/1.11--------???????? |
| heyvickey | The formula is D1/k-g. Here g = 0 as the div growth was 0. |