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von Bora Corporation​ (VBC) is expected to pay a $ 2.75 dividend at the end of this year. If you expect​ VBC's dividend to grow by 4​% per year forever and​ VBC's equity cost of capital is 14​%, then the value of a share of VBS stock is closest​ to:

Respuesta :

Answer:

$27.50

Explanation:

Given that,

Expected dividend to pay this year = $2.75

Growth rate of dividend = 4% per year

Equity cost of capital = 14​%

It is calculated by dividing the dividend to be paid this year by the difference of equity cost of capital and growth rate of dividend.

Value of a share of VBS stock:

= Expected dividend ÷ (Cost of equity - Growth rate of dividend)

= $2.75 ÷ (0.14 - 0.04)

= $2.75 ÷ 0.1

= $27.5

Therefore, the value of a share of VBS stock is closest​ to $27.5.

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