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The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock today. The dividends will grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on the stock, what is its current price?"

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ijaz4308

Answer:

$31.2

Explanation:

The price of the share of the  Jackson-Timberlake Wardrobe Co. shall be determined through the following mentioned formula:

Price of share=[D(1+g)/(r-g)]

In the given question

D=dividend just paid by the company=$1.95

g=growth rate=4%

r=required rate of return=10.5%

Price of share=[$1.95(1+4%)/(10.5%-4%)]

                       =$31.2