Question
In: Finance
Miles Hardware has an annual cash dividend policy that raises the dividend each year by 12%....
Miles Hardware has an annual cash dividend policy that raises the dividend each year by 12%. Last year's dividend, Div0, was $1.70 per share. Investors want a return of 16% on this stock. What is the stock's price if
a.the company will be in business for 10 years and not have a liquidating dividend?
b.the company will be in business for 20 years and not have a liquidating dividend?
c.the company will be in business for 25 years and not have a liquidating dividend?
d. the company will be in business for 40 years and not have a liquidating dividend?
e.the company will be in business for 90 years and not have a liquidating dividend?
f.the company will be in business forever?
Solutions
Expert Solution
a.the company will be in business for 10 years and not have a
liquidating dividend?
=1.70*(1+12%)/(1+16%)*(1-((1+12%)/(1+16%))^10)/(1-((1+12%)/(1+16%)))=14.08746449
b.the company will be in business for 20 years and not have a
liquidating dividend?
=1.70*(1+12%)/(1+16%)*(1-((1+12%)/(1+16%))^20)/(1-((1+12%)/(1+16%)))=24.00567151
c.the company will be in business for 25 years and not have a
liquidating dividend?
=1.70*(1+12%)/(1+16%)*(1-((1+12%)/(1+16%))^25)/(1-((1+12%)/(1+16%)))=27.80261683
d. the company will be in business for 40 years and not have a
liquidating dividend?
=1.70*(1+12%)/(1+16%)*(1-((1+12%)/(1+16%))^40)/(1-((1+12%)/(1+16%)))=35.90478284
e.the company will be in business for 90 years and not have a
liquidating dividend?
=1.70*(1+12%)/(1+16%)*(1-((1+12%)/(1+16%))^90)/(1-((1+12%)/(1+16%)))=45.57693441
f.the company will be in business forever?
=1.70*(1+12%)/(16%-12%)=47.6
jeff jeffy answered 1 year agoRelated Solutions
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