Quantitative Problem 1: Hubbard Industries just paid a common dividend, D0, of $2.00. It expects to grow at a constant rate of 4% per year. If investors require a 12% return on equity, what is the current price of Hubbard's common stock? Round your answer to the nearest cent. Do not round intermediate calculations.
$ per share
Zero Growth Stocks:
The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is expected to remain constant over time. In this situation, the equation is:
P0=D/rs