Elk County Telephone has paid the dividends shown in the following table over the past 6 years.

Question:

Year Dividend per share

2012 .......$2.87

2011 ....... 2.76

2010 ....... 2.60

2009 ....... 2.46

2008 ....... 2.37

2007 ....... 2.25

The firm’s dividend per share next year is expected to be $3.02.

a. If you can earn 13% on similar-risk investments, what is the most you would be willing to pay per share?

b. If you can earn only 10% on similar-risk investments, what is the most you would be willing to pay per share?

c. Compare and contrast your findings in parts a and b, and discuss the impact of changing risk on share value.

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...