CFA Practice Question

CFA Practice Question

An analyst gathered the following information about a common stock:

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.
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