Thursday
October 2, 2014

Homework Help: FInance

Posted by Paul on Monday, March 10, 2014 at 7:26pm.

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders.

Required:

(a)
Suppose a company currently pays an annual dividend of $3.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6 percent per year indefinitely. If the required return on this stock is 12 percent, what is the current share price? (Do not round intermediate calculations.

Current share price $

(b)
Now suppose the company in (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.80 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint: Find the equivalent annual end-of-year dividend for each year.) (Do not round intermediate calculations.

Current share price $

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Finance (common stock) - I need a formula for: A share of common stock of xyz ...
Finance (common stock) - I need a formula for: A share of common stock of xyz ...
investing - (Dividend discount Model) Assume RHM is expected to pay a total cash...
business - Wallace Inc., a developer of radiology equipment, has stock ...
Finance - If you bought a share of common stock, you would probably expect to ...
Finance - MMK Cos. normally pays an annual dividend. The last such dividend paid...
Finance - The Frenall Company just paid a common stock dividend of $4.00 per ...
FINANCE - General Cereal common stock dividends was $0.79 in 2000 and the last ...
College Accounting - A company had stock outstanding as follows during each of ...
finance - National Health Corporation (NHC) has a cumulative preferred stock ...

Search
Members