Assume Evco, Inc. has a current stock price of $49. 11 and will pay a $2.25 dividend in one year, its equity cost of capital is 18%. 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? We can expect Evco stock to sell for $ ( Round to the nearest cent.)

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 18MC
Question
Assume Evco, Inc. has a current stock price of $49. 11 and will pay a $2.25
dividend in one year, its equity cost of capital is 18%. 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? We can expect Evco stock to sell for $ (
Round to the nearest cent.)
Transcribed Image Text:Assume Evco, Inc. has a current stock price of $49. 11 and will pay a $2.25 dividend in one year, its equity cost of capital is 18%. 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? We can expect Evco stock to sell for $ ( Round to the nearest cent.)
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