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Compute the most economically rational value

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Reference no: EM1356662

Assume IBM is expected to pay a total cash dividend of $3.60 next year and dividends are expected to grow indefinitely by 3 percent a year. Assume the required rate of return (i.e. equity holder's opportunity cost of capital) is 9 percent. Assuming this is the best information available regarding the future of this firm, what would be the most economically rational value of the stock today (i.e. today's "price")?
a. 0.60
b. 120.00
c. 60.00
d. 92.70
e. 40.00

Reference no: EM1356662

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