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Boots Roofing just paid its annual dividend of $0.90 a share. The firm recently announced that all future dividends will be increased by 3.5 percent annually. Today, what is one share of this stock worth to you if you require a 12 percent annual rate of return?

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sakhilemdletshesm

Answer:

Price of share = $10.96

Explanation:

next year dividends would be .9*(!+0.035) = 0.9315

Price of share = div1/(r-g)

= 0.9315/(.12-0.035)

= $10.96

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