Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The boardof directors ofAPI, a relatively new electronicsmanufacturer, has decided to begin paying a common stock dividend to increase the attractiveness of the stock in

The boardof directors ofAPI, a relatively new electronicsmanufacturer, has decided to begin paying a common stock dividend to increase the attractiveness of the stock in the free market. The board plans to pay $2.45 per sharein the coming year (i.e., next year) and anticipates that its future dividends will increase at an annual rate consistent with that experienced over the period from 2013 - 2016 (see below).The company currently has a beta of 1.5, the rate of return for the market is expected to be 8% and the risk-free rate is currently 3%. Given this scenario, what is the current value of API's common stock? If the current market price is $48.00 per share, should you purchase this stock.Briefly, explain your answer. (HINT: This problem requires a three-part calculation to solve it).USE MS EXCEL TO CONDUCT YOUR CALCULATIONS (embed your calculations in the cells and do NOT round your interim calculations, rather use links between the cells), then post your spreadsheet using this link (Textbook Assignment 2).

YearDividend

2016$2.32

2015$2.21

2014$2.10

2013$2.00

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Mathematics For Business Economics, Life Sciences, And Social Sciences

Authors: Raymond Barnett, Michael Ziegler, Karl Byleen, Christopher Stocker

14th Edition

0134674146, 978-0134674148

More Books

Students also viewed these Finance questions

Question

summarize the history of work psychology;

Answered: 1 week ago

Question

Always have the dignity of the other or others as a backdrop.

Answered: 1 week ago