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The RLX Co. just paid a dividend of $3.20 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on the company's stock, what is the current price?

Respuesta :

The current price of the company's stock is $51.20.

What is the current price of the stock?

The formula that can be used to determine the price of the stock is the constant dividend growth model

Price = d1 / (r - g)

d1 = next dividend to be paid = current dividend paid x (1 + growth rate) = $3.20 x (1.04) = $3.328

r = cost of equity

g = growth rate

Price = $3.328 / (10.5 - 4)

$3.328 / 0.065 = $51.20

To learn more about how to determine the value of a stock, please check: https://brainly.com/question/18648993

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