What is the price per share of lanc stock

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Reference no: EM132042552

Lancaster Colony Corp. (LANC) will pay a dividend of $0.80 in one quarter. LANC pays dividends quarterly. Assume that it will continue to pay this dividend forever. Further assume the firm’s equity cost of capital is 11.68% (quoted as an EAR).

(a) Under these assumptions, what is the price per share of LANC stock?

(b) Instead of a constant dividend, assume LANC will grow its dividend at a constantrate forever. Continue to assume the next divided will be $0.80 and paid in onequarter. What quarterly growth rate would justify a price of $34.78?

Reference no: EM132042552

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