Question

Banana Company just paid a dividend of $5 per share. If dividends have a growth rate of 5 percent and you require 12 percent return, what is the value of the stock?

43.75

71.42

105.00

75.00

41.67

96.42

I had thought the answer was 71.42 because I had taken $5 / .12-.05 = .7142 X 100 = 71.42%, but i'm told the answer is 75%. Would someone be able to explain this one to me?

Thanks!