Bui Corp. pays a constant $14.60 dividend on its stock. The company will maintain this dividend for the next nine years and will then cease paying dividends forever. Required: If the required return on this stock is 9 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current share price $ Explanation: The price of any financial instrument is the present value of the future cash flows. The future dividends of this stock are an annuity for nine years, so the price of the stock is the present value of an annuity, which will be: P0 = $14.60(PVIFA9%,9) P0 = $87.53

Bui Corp. pays a constant $14.60 dividend on its stock. The company will maintain this dividend for the next nine years and will then cease paying dividends forever.

Required:

If the required return on this stock is 9 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current share price

$

 
Explanation:

The price of any financial instrument is the present value of the future cash flows. The future dividends of this stock are an annuity for nine years, so the price of the stock is the present value of an annuity, which will be:

P0 = $14.60(PVIFA9%,9)

P0 = $87.53