Homework SourseLeslies Unique Clothing Stores offers a common stock that pa
Leslie\'s Unique Clothing Stores offers a common stock that pays an annual dividend of $2.00 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a 12% return on your equity investments?
| $10.00 | |
| $13.33 | |
| $18.88 | |
| $20.00 | |
| $16.67 |
Solution
In case of constant dividend, price per share is calculated as below:
Dividend per share / Required rate of return
= $2.00 / 0.12
= $16.67 (Answer)
