3.The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the year that just ended. Earning and dividend per share are expected to grow at a rate of 5% per year in the future. Determine the value of the stock:

Answer 1

A. 1.3/.12=$10.8333

B. 1.3/.15=$8.6666

C. The higher the rate of return, the lower the value of the stock.