NoGrowth Corporation currently pays a dividend of per quarter, and it will continue to pay this dividend forever. What is the price per share of NoGrowth stock if the firm's equity cost of capital is ?

$18.88

Explanation:

The dividends are being paid quaterly so in other to use those dividends, the cost of capital will have to be converted to a quaterly rate as well.

r =

r = 2.966%

Using the Dividend discount model, the price per share is;

= Next Dividend / ( cost of capital - growth rate)

= 0.56 / 0.02966

= $18.88

Note; there is no growth rate as the company will pay that dividend forever.

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