Nogrowth industries presently pays an annual dividend of $ 1.90 per share and it is expected that these dividend payments will continue indefinitely. if nogrowth's equity cost of capital is 11%, then the value of a share of nogrowth's stock is closest to: a. $ 20.72 b. $ 19.00 c. $ 17.27 d. $ 13.82

$17.27

Explanation:

The stock intrinsic value is calculated using dividend discounted model (DDM). The DDM is stated as below:

Stock intrinsic value = [This year dividend x (1 + Dividend growth)]/[Equity cost of capital - Dividend growth]

                                  = [1.9 x (1 + 0%)]/[11% - 0%] = $17.27

So vlaue of NoGrowth's stock is estimated at $17.27

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