Answer:
The value of the stock is $19.50
Explanation:
Hi, let´s check out the formula that we need to use in order to find the price of this stock.
[tex]Price=\frac{Do(1+g)}{r-g}[/tex]
Where:
Do= last dividend (in our case, $1.30)
g = growth rate of the dividend (in our case, 5% or 0.05)
r = required rate of return (in our case, 12% or 0.12)
Everything should look like this:
[tex]Price=\frac{1.30(1+0.05)}{0.12-0.05} =19.50[/tex]
Therefore, the value of this stock is $19.50
Best of luck.
