Nofal Corporation will pay a $4.65 per share dividend next year. The company pledges to increase its dividend by 7 percent per year, indefinitely.

Nofal Corporation will pay a $4.65 per share dividend next year. The company pledges to increase its dividend by 7 percent per year, indefinitely.

Required:

If you require a return of 11 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current stock price

$

Explanation:

Using the constant growth model, we find the price of the stock today is:

P0 = D1 / (R – g)

P0 = $4.65 / (.11 – .0700)

P0 = $116.25