Owen Inc. has a current stock price of $12.00 and is expected to pay a $0.60...

Owen Inc. has a current stock price of $12.00 and is expected to pay a $0.60 dividend in six months. IfOwen·s equity cost of capital is 15%, a)What price would its stock be expected to sell for immediately after it pays the dividend?

Expert Solution

P0 = (Div + P1) / (1 + r)

$12.00 = ($0.60 + P1) / (1 + 0.15)

$12.00 * 1.15 = $0.60 + P1

$13.80 = $0.60 + P1

P1 = $13.80 - $0.60

P1 = $13.20

jeff jeffy answered 2 years ago

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