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The investor decides to ask another consultant for investment options. The other her adviser proposes to invest 100,000 euros in shares. Her proposal concerns company
The investor decides to ask another consultant for investment options. The other her adviser proposes to invest 100,000 euros in shares. Her proposal concerns company that is expected to distribute a dividend at the end of the year 1 euro. The steady pace increase in the company's dividends is projected to be 3%. The company has = 1,5, risk-free return is 2% and the expected return on the market portfolio is 6%.So the Required rate of return will be 8% and he will buy 5000 shares.After the purchase provides that from the end of the 1st year and after the company will announce investments that will increase the business growth prospects and hence the dividends from 3% to 4%. The investor intends to collect the dividend at the end of the 1st year and sell the shares.
What is the selling price of the share at the end of the 1st year? What will be the realized return on investment (if its forecast consultant prove correct)?
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