The RLX Company just paid a dividend of $3.20 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. Investors require a return of 10.5 percent on the company's stock. a. What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What will the stock price be in 3 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What will the stock price be in 15 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Current price b. Stock price in 3 years c. Stock price in 15 years
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The formula is: \[ P_0 = \frac{D_1}{r - g} \] where: - \( P_0 \) is the current stock price, - \( D_1 \) is the dividend next year, - \( r \) is the required rate of return, and - \( g \) is the growth rate of dividends. Show more…
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