Business executive is offered a management job

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Reference no: EM13930146

A business executive is offered a management job at Generous Electrical Company. They offer to give him a five-year contract which calls for a salary of $62,000 per year, plus 600 shares of their stock at the end of the five years. The executive is currently employed by Fearless Bus Company and they, too, offered him a five-year contract. It calls for a salary of $65,000, plus 100 shares of Fearless Stock each year. The stock is currently worth $60 per share and pays an annual dividend of $2 per share. Assume end-of-year payments of salary and stock. Stock dividends begin one year after the stock is received. The executive believes that the value of stock and the dividend will remain constant. If the executive considers 9% a suitable rate of return in this situation, what must the Generous Electric stock be worth per share to make the two offers equally attractive?

Reference no: EM13930146

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