The required rate of return calculation has an enormous effect on the

QUESTION

The required rate of return calculation has an enormous effect on the stocks price using these types of models. If we assume that Nations Banks required rate of return on its common stock is 12% instead of 13%, what would the Gordon Growth Model Stock Growth Price yieldP0 = FV(1 + i) / kj 1 = So
The required rate of return 12% insted of 13%.The growth rate is 10.57%.FV is $2.00.(Note: In previous problem you only posted these information). Stock price P0 = FV(1 i)/(Kj i) = 2.00(1.1057)/(12% 10.57%) = 2.2114 /0.0143 = 154.64 Stock price P0 is

4. Yes there is a significant difference. At 13% required rate of return the Stock price is $91.If the stock price is more then the value to its shareholders would increase.

ANSWER:

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