The Great Indoors sells carpet and floor coverings The compa

The Great Indoors sells carpet and floor coverings. The company will pay stockholders a $1.00 quarterly dividend later this afternoon. Investors anticipate that the company will increase this dividend by a constant 1.0% percent per quarter. If investors require a 10.00% annual return with quarterly compounding, what is the current stock price?

$11.22

$68.33

$67.33

$66.67

$11.11

Solution

Quarterly Rate = 10/4= 2.5%

Current stock price = D1/(Rs-g)

                 = 1/(.025-.01)

                = 1/.015

               = $ 66.67 per share

correct option is \"D \"