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Stock Valuation
A. Based on the figures provided, calculate each of the following:
1. The new dividend yield if the company increased its dividend per share by 1.75
2. The dividend yield if the firm doubled its outstanding shares
3. The rate of return on equity (i.e., the cost of stock) based on the new dividend yield you calculated above
B. What effect would you expect each of the calculations you performed to have in terms of shareholder value? In other words, suppose the company's goal is to maximize shareholder value. How will each of the situations support or inhibit that goal? Be sure to justify your reasoning.
C. To what extent do you feel the company's dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate your claims.
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You purchased 250 shares of a particular stock at the beginning of the year at a price of $75.13. The stock paid a dividend of $0.85 per share, and the stock price at the end of the year was $81.64. What was your dollar return on this investment?
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