No Growth 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 of No Growth Corporation's stock, we can use the formula for the price of a perpetuity:

\[
\text{Price} = \frac{D}{r}
\]

where:
- $ D $ is the dividend paid per period (in this case, per quarter),
- $ r $ is the required rate of return or the equity cost of capital.

### Step-by-step solution:
1. The quarterly dividend is $ D = 0.48 $ dollars.
2. The annual cost of capital is 12.84%, but since dividends are paid quarterly, we need the quarterly rate. To find the quarterly rate, divide the annual rate by 4:

\[
r = \frac{12.84\%}{4} = 0.0321 = 3.21\%
\]

3. Now, apply the formula for the price of the stock:

\[
\text{Price} = \frac{0.48}{0.0321} = 14.95
\]

### Conclusion:
The price per share of No Growth Corporation's stock is **$14.95**.

Would you like more details on any step? Here are some follow-up questions:

1. How does the perpetuity formula change if dividends are expected to grow?
2. What impact does a change in the equity cost of capital have on stock price?
3. How can inflation affect the value of perpetuity-based stock pricing?
4. What assumptions are involved in using the perpetuity formula?
5. How would you price the stock if dividends were paid annually instead of quarterly?

**Tip:** Remember to adjust the discount rate to match the dividend payment frequency when dealing with perpetuity or annuity calculations.

No Growth 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%? (Round to the nearest cent.)

Learn how to calculate the stock price for No Growth Corporation using the perpetuity formula. This problem involves finance concepts like perpetuity and equity cost of capital. Suitable for college-level finance students. The dividend is $0.48 per quarter, and the equity cost of capital is 12.84%.

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