Answer:
$26.617
Explanation:
Stock price = D1 ÷ (r - g)
where,
D1 = next expected dividend
r = required return = 14 percent
g = growth rate = 2.8 percent
Therefore, the stock price will be as follows:
= [$2.90 × (1 + 2.8%)] ÷ (14% - 2.8%)
= 2.9812 ÷ 11.2%
= $26.617
Therefore, one share of this stock worth $26.617 today if I require a 14 percent rate of return.
