1. You own shares of Crane DVD Company and are interested in selling them. With so many people downloading music these days, sales, profits, and dividends at Crane have been declining 6 percent per year. The firm just paid a dividend of $1.90 per share. The required rate of return for a stock this risky is 14 percent. If dividends are expected to decline at 6 percent per year, what is a share of the stock worth today? (Round answer to 2 decimal places, e.g. 15.20.) Worth of share of stock $

    The dividend paid decisive year is = $1.9

    the enlargement admonish is = -6%

    The required admonish of repay is = 14%

    According to the gordon Enlargement Model,

    D1 = $1.9 ( 1- 0.06)

    = $1.786

    Po = D1 / Re – g

    = $1.786/ 0.14 – (-0.06)

    =$1.786/0.20

    =$8.93 (rounded impromptu to brace decimal places)

    Therefore, the appreciate of shares today is $8.93.