(a) The ANZAC Corporation plans to be in business for 30 years. They announce that they will...
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(a) The ANZAC Corporation plans to be in business for 30 years. They announce that they will pay a dividend of $3.00 per share at the end of one year, and continue increasing the annual dividend by 4% per year until they liquidate the company at the end of 30 years. If you want to earn a rate of return of 12% by investing in their stock, how much should you pay for the stock?
(b) If the company was to announce that it would continue increasing the dividend at 4% per year forever, how much more would you be willing to pay for its stock, assuming your required rate of return is still 12%?
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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