NoGrowth Corporation currently pays a dividend of $0.48 per quarter, and it will continue to pay this dividend forever. What is the price per share of NoGrowth stock if the firm's equity cost of capital is 12.84%?
The stock price is $
(Round to the nearest cent.)

To calculate the price per share of NoGrowth Corporation's stock, we can use the **Dividend Discount Model (DDM)** for a stock with constant dividends. Since the dividends are expected to remain constant indefinitely, the formula for the price of a perpetuity is:

\[
P = \frac{D}{r}
\]

Where:
- $ P $ is the price per share.
- $ D $ is the quarterly dividend.
- $ r $ is the equity cost of capital per quarter.

### Given:
- Dividend per quarter $ D = 0.48 $ USD.
- Annual equity cost of capital $ r_{\text{annual}} = 12.84\% $.

First, we need to convert the annual cost of capital to a quarterly rate:

\[
r_{\text{quarterly}} = \frac{12.84\%}{4} = 3.21\% = 0.0321
\]

Now, apply the formula:

\[
P = \frac{0.48}{0.0321}
\]

\[
P = 14.95
\]

### Final Answer:
The price per share of NoGrowth Corporation's stock is **$14.95**.

Let me know if you need further details or have any questions!

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Here are 5 related questions for further understanding:
1. How would the stock price change if the cost of equity increases to 15%?
2. What if NoGrowth increased its dividend to $0.60 per quarter?
3. How does the Dividend Discount Model change if there is dividend growth?
4. Can we use this model for companies with variable dividends? Why or why not?
5. What would be the stock price if the company paid dividends annually instead of quarterly?

**Tip:** Always ensure you're using the correct time frame for rates and dividends in stock valuation formulas.

NoGrowth Corporation currently pays a dividend of $0.48 per quarter, and it will continue to pay this dividend forever. What is the price per share of NoGrowth stock if the firm's equity cost of capital is 12.84%? The stock price is $ (Round to the nearest cent.)

Learn how to calculate the stock price of NoGrowth Corporation, which pays a dividend of $0.48 per quarter, using the perpetuity formula. The solution involves converting an annual equity cost of capital of 12.84% to a quarterly rate and applying the Dividend Discount Model (DDM). This problem is suitable for undergraduate finance students.

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