Michael\'s, Inc. just paid $2.05 to its shareholders as the annual dividend. Sim
ID: 2705131 • Letter: M
Question
Michael's, Inc. just paid $2.05 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.50 percent. If you require a rate of return of 8.7 percent, how much are you willing to pay today to purchase one share of Michael's stock?
Michael's, Inc. just paid $2.05 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 4.50 percent. If you require a rate of return of 8.7 percent, how much are you willing to pay today to purchase one share of Michael's stock?
Explanation / Answer
P0= D1/(Ke-g)
P0= (2.05x1.045)/(.087-.045)
P0= $51.01