Assume that Monsanto s last dividend paid yesterday was 225

\"Assume that Monsanto s last dividend (paid yesterday) was $2.25 per share. You expect dividends to grow at a constant rate of 5% per year forever. Investors\' required rate of return is 11%. According to the Dividend Discount Model, what should be the price of this stock?\"

Solution

Current price=D1/(Required return-Growth rate)

=(2.25*1.05)/(0.11-0.05)

which is equal to

=$39.375