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Michael's, inc. just paid $2.60 to its shareholders as the annual dividend. simultaneously, the company announced that future dividends will be increasing by 5.60 percent. if you require a rate of return of 9.8 percent, how much are you willing to pay today to purchase one share of michael's stock?

Respuesta :

The new dividend with 5.60% increase is $2.7456. To get 9.8% of return she should get the share for $2.50.
(2.7456 - 2.50) / 2.50 = 9.824

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