Problem 7-11

Declining Growth Stock Valuation

Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If D0= $6 and rs= 11%, what is the estimated value of Brushy Mountain's stock? Round your answer to the nearest cent.