Whole Foods Inc. paid a quarterly dividend of $0.47 recently. Treasury bills are yielding 4%, and the

Question:

Whole Foods Inc. paid a quarterly dividend of $0.47 recently. Treasury bills are yielding 4%, and the average stock is returning about 11%. Whole Foods is a stable company. The return on its stock responds to changes in the political and economic environment only about 70% as vigorously as that of the average stock. Analysts expect the firm to grow at an annual rate of 3.5% into the indefinite future. Calculate a reasonable price that investors should be willing to pay for Whole Foods 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...