Price = D1 / ( r - g)
where D1 equals the next Dividend: $2
[if you hadn't been "given" the next (expected) dividend, you would calculate D1 = D0(1 + g)]
P = $2 / (0.19 - 0.15)
= $2 / 0.04
= $50
B. $50.00
2/(.19-.15) =
2/.04=
50.00
A share is expected to pay a dividend of $2. If the constant growth rate for this share is 15%, and if investors require a 19% rate of return, what is the price of the share?
A. $10.52
B. $50.00
C. $13.33
D. $57.50
