Michael\'s, Inc. just paid $2.10 to its shareholders as the annual dividend. Sim
ID: 2627459 • Letter: M
Question
Michael's, Inc. just paid $2.10 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.60 percent. If you require a rate of return of 8.8 percent, how much are you willing to pay today to purchase one share of Michael's stock?
Michael's, Inc. just paid $2.10 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.60 percent. If you require a rate of return of 8.8 percent, how much are you willing to pay today to purchase one share of Michael's stock?
Explanation / Answer
Price= D1/(Ke-g)
Price of Michael's stock= (2.10*1.046)/(.088-.046)= $52.3