Sudsy Inc. recently paid an annual dividend of $1.00 per share. Analysts expect that amount to be

Question:

Sudsy Inc. recently paid an annual of $1.00 per share. Analysts expect that amount to be paid for three years after which dividends will grow at a constant 5% per year indefinitely. The stock is currently trading at $20, and investors require a 15% return on similar issues. Has the stock market properly priced Sudsy’s stock?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...