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Pharsalus Inc. just paid a dividend (i.e., D0) of $ 3.32 per share. This dividend is expected to grow at a rate of 8.0 percent per year forever. The appropriate discount rate for Pharsalus's stock is 9.6 percent. What is the price of the stock

Respuesta :

Answer:

$224.10

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

(3.32 x 1.08) / (0.096 - 0.08) = 224.10

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