The ELL common stock pays an annual dividend of 223 a share

The ELL common stock pays an annual dividend of $2.23 a share and is committed to maintaining a constant dividend. How much are you willing to pay for one share of this stock if your required return is 16 percent?

Select one:

A. $14.04

B. $13.94

C. $14.56

D. $14.67

E. $13.88

Solution

Current price=annual dividend/required rate

Which is equal to

=(2.23/0.16)

Which is equal to

=$13.94(approx).