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Shares in Company A are currently trading in the market at a price of $16.23. Market analysts expect the next dividend per share (to be
Shares in Company A are currently trading in the market at a price of $16.23. Market analysts expect the next dividend per share (to be paid one year from today) is $1.45 and that the return on equity for Company As stock should be 13.5%.
Now suppose the company is looking to have an unexpectedly good year and analysts upgrade the expected dividend to $1.86 a one-time change. What will happen to the current market price of Company As stock? Justify your answer.
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