Common stock in single annual installment

Assignment Help Financial Management

Reference no: EM131882844

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.

a. Suppose a company currently pays an annual dividend of $4.00 on its common stock in a single annual installment, and management plans on raising this dividend by 2 percent per year indefinitely. If the required return on this stock is 14 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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 $1.00 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 and round your answer to 2 decimal places, e.g., 32.16.)

Current share price $

Reference no: EM131882844

Questions Cloud

Experiencing rapid growth- what is the stock price : Navel County Choppers Inc. is experiencing rapid growth. If the dividend per share just paid was $2.12, what is the stock price?

Determine the claims of the tenant and the landlord : What are the legal considerations you would evaluate to determine the claims of the tenant and the landlord? In whose favor would you rule, and why?

Explain the stock valuation technique : Mr. Jones is 35 years old, married with two children, and would like your help in planning a long-term investment strategy with the $100,000 he has to invest.

Expected one-year holding-period return on sport stock : If the market price of a share is currently $69, what is your expected one-year holding-period return on SportX stock?

Common stock in single annual installment : Suppose a company currently pays an annual dividend of $4.00 on its common stock in a single annual installment, and management plans on raising this dividend

Discuss how you feel about wal-marts alternative strategies : How do you think their Information Management Systems have contributed to their success?

Explain the clarity of the assignment parameters : College students require a unique approach to education. You will examine the sample syllabus provided. When reviewing the syllabus, pay particularly.

What is one share of stock worth today at required return : What is one share of this stock worth today at a required return of 18.5%?

Franco level of cognitive development : In what sense is the dream a reflection of Franco's level of cognitive development?

User Account

All Pages