Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years and then never pay another dividend. If you require a return of 10 percent on the company's stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years and then never pay another dividend. If you require a return of 10 percent on the company's stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend
of $2 per share and has announced that it will increase the dividend by $6 per share for
each of the next five years and then never pay another dividend. If you require a return
of 10 percent on the company's stock, how much will you pay for a share today? (Do not
round intermediate calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Current share price
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Step 1
The dividend is the portion of profits distributed to the company's stockholders. The share price is the price at which the share is currently trading on the market. The predicted rate of return that the stakeholders expect to achieve in the future is represented by the return expected to receive on a share.
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