Suppose that a stock paid a divident of $2 this year and that your required reutrn on equity investments is 10%. Using the gordon growth model if you expect the dividends to grow at 3%, you will be willing to pay for the stock the amount. 2. Using the Gordon growth model of stock price determination, if a share of stock will pay a $1 dividend next year, dividends are expected to grow 2, and people require an 10% return on equity investments, then the price of the stock is.
3. According to the Gordon growth model of stock price determination, at what price should a stock sell for if the required return on equity investments is 12%, the stock will pay a dividend of $1.80 next year, and dividends are expected to grow at a constant rate of 3%.
A. $20.
B. $12.
C. $15.
D. $18.