Atlas Home Supply has paid a constant annual dividend of 240

Atlas Home Supply has paid a constant annual dividend of $2.40 a share for the past 15 years. Yesterday, the firm announced the dividend will increase next year by 10 percent and will stay at the same level forever. The required return on this stock is 15 percent. What is the current value per share? 1) $25.51 -2) $26.08 3) $48.00 4) $52.80 5) $58.08

Solution

Current Value = Expected Dividend / ( Required Return - Growth Rate)

= ( 2.40 * 110%) / ( 15% - 10%)

=$ 52.80

Hence the correct answer is 4) $ 52.80