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Assume​ Evco, Inc., has a current stock price of $39 and will pay a $1.80 dividend in one​ year; its equity cost of capital is 13%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current​ price?The expected price is $_______. ​(Round to the nearest​ cent.)

Question

Assume​ Evco, Inc., has a current stock price of $39 and will pay a $1.80 dividend in one​ year; its equity cost of capital is 13%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current​ price?

The expected price is $_______. ​(Round to the nearest​ cent.)

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Step 1

Calculation of Expected Price:

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Step 2

With the current price of $39, the company can anticipate to sell its stock for $42.27 ...

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