Answer:
If the required rate of return is 14 percent, the price I am willing to pay is 11.113
Explanation:
To calculate what you are willing to pay today to purchase stock in this company if your required rate of return is 14 percent, you have to use the following formula.
Po = D1 / (k-g)
Po = purchase price
D1 = Dividend in paid in next year
k = required rate of return
g= growth rate
Po = (3.30 (1-0.121)) / (0.14-(-0.121))
Po = 2.9007/ 0.261
Po= 11.113.
