Hudson corporation will pay a dividend of $3.28 per share next year. the company pledges to increase its dividend by 3.75 percent per year indefinitely. if you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

The share price of the stock=$52.48

Explanation:

We can use the required rate of return formula to calculate the share price, or the amount you will pay for the company's stock today, the formula is as shown:

RRR=(EDP/SP)+DGW

where;

RRR=required rate of return

EDP=expected dividend payment

SP=share price

DGW=dividend growth rate

In our case:

RRR=10%=10/100=0.1

EDP=$3.28

SP=unknown

DGW=3.75%=3.75/100=0.0375

replacing in the original expression;

0.1=(3.28/SP)+0.0375

(0.1-0.0375)=(3.28/SP)

0.0625=3.28/SP

SP=3.28/0.0625

The share price of the stock=$52.48

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