Find the equivalent annual end-of-year dividend

Reference no: EM131962755

Question: 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. 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 $.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. Round your answer to 2 decimal places (e.g., 32.16).)

Current share price $

Reference no: EM131962755

Questions Cloud

What is the firm value today : What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered.

Could corporate income ever be subject to triple taxation : How do corporate tax rates in the United States compare to those of other countries around the world? Should this be a concern for the U. S. economy?

Find the minimum annual return over the five years : Based on the result from 1), find the minimum annual return over the five years that the corporation should generate to make the project viable economically.

Other viewpoints by which to judge firm performance : Apart from financial performance, are there other viewpoints by which to judge a firm's performance?

Find the equivalent annual end-of-year dividend : 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.

Determine the recommended decision under priori criterion : A corporation is considering a new production process that, if efficient, will save the corporation $350000 a year for the next 5 years.

Computing what is the current share price : Suppose a company currently pays an annual dividend of $6.00 on its common stock in a single annual installment, and management plans on raising this dividend.

What was the price of the race track : Indigo River Health just bought a new race track. What was the price of the race track?

Calculate risk and return behavior for various combinations : (Correlation, Diversification, Risk and Return) Use the following risk and return value to calculate the risk and return behavior for various combinations.

User Account

All Pages