The current annual dividend of ABC Corporation is $2.00 per share. Five years ago, the dividend was

Question:

The current annual dividend of ABC Corporation is $2.00 per share. Five years ago, the dividend was $1.36 per share. The firm expects dividends to grow in the future at the same compound annual rate as they grew during the past five years. The required rate of return on the firm's common stock is 12 percent. The expected return on the market portfolio is 14 percent. What is the value of a share of common stock of ABC Corporation using the constant dividend growth model?

a. $11.

b. $17.

c. $25.

d. $36.

e. $54.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
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