suppose big d inc just paid a dividend of .50 per share it is expected dto increase its dividend by 2 per year if the market requires a return of 10 on assets of this risk how much wshould the stock be selling for

The question is incorrect, the correct question is stated below.

Suppose Big D, inc., just paid a dividend of $0.50 per share.  It is expected to increase its dividend by 2% per year. If the market requires a return of 10% on assets of this risk, how much should the stock be selling for?

The stock should be selling for P0 = $6.375 rounded off to $6.38

Explanation:

Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g) / (r - g)

Where,

P0 = 0.5 * (1+0.02)  /  (0.10 - 0.02)

P0 = $6.375 rounded off to $6.38

our agriculture industry and our business industry

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