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Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.80,...

Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.80, but management expects to reduce the payout by 4 percent per year indefinitely. If you require a return of 9.5 percent on this stock, what will you pay for a share today?

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Answer #1
As per dividend discount model,
Price of share today = D0*(1+g)/(Ke-g) Where,
= 9.80*(1+(-0.04))/(0.095-(-0.04)) D0 Last dividend $       9.80
= $    69.69 g growth rate       -0.040
Ke Required return         0.095
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