Consider the current share price of NIKS Inc., which is $50.36. The company will pay a...

Consider the current share price of NIKS Inc., which is $50.36. The company will pay a dividend of $2.20 in one year. The cost of equity capital of the firm is 12%. What price should you expect NIKS's stock to sell for immediately after it pays the dividend in one year to justify its current market price?

Select one:

$22.89

$69.92

$56.40

$54.203

Expert Solution

Price after one year=Current Price*(1+cost of equity)-Expected Dividend
=50.36*(1+12%)-2.20
=54.203

jeff jeffy answered 2 years ago

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