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A company is planning to invest in Jumbo PLC . The assistant accountant provides the following information regarding Jumbo PLC ' s investment. The current
A company is planning to invest in Jumbo PLC
The assistant accountant provides the following information regarding Jumbo PLCs investment. The current net income of Jumbo PLC is million. The company has issued both preferred and common shares. No dividends will be paid on any of the shares over the next three years. Please explain the followings to the company board of directors.
State one possible reason to explain why the company chooses not to declare dividends for the next three years.
Suppose the company will pay a dividend of $per common share four years from today and indefinitely increase the dividend by percent per year. If the required return on this stock is percent, what is the price per common share in three years? What is the current share price?
Suppose the company decides to pay a dividend of $ per preferred share four years from now and maintains the practice forever. If the required rate of return ispercent what is the price per preferred share three years from now? What is the current share price for the preferred stock?
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