Dividend from Financial StatementsStockholder'sCashDividendYearStock PriceEquity (in millions)Div/share (S)Yield3.00% S2.70% S2.60% S97.3320152.922,491.0020163.12429.00115.5620173.321,030.00127.69 3. The rate of return on equity (i.e., the cost of stock) based on the new dividend yield you calculated aboveCashReturn onYearDiv/ShareStock PriceInvestment($)+1.75$$CALCULATE ROI2015201620174.6797.334.875.0723.72% [(Dividends $1.75) (new price old price)]/ (old price)14.89% [(Dividends $1.75) (new price - old price)]/ (old price)115.56$127.69

Question
Asked Nov 23, 2019
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What effect would the calculation performed have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will the rate of return on equity (increase dividend per share by 1.75) support or inhibit that goal? Be sure to justify reasoning.

Dividend from Financial Statements
Stockholder's
Cash
Dividend
Year
Stock Price
Equity (in millions)
Div/share (S)
Yield
3.00% S
2.70% S
2.60% S
97.33
2015
2.92
2,491.00
2016
3.12
429.00
115.56
2017
3.32
1,030.00
127.69
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Dividend from Financial Statements Stockholder's Cash Dividend Year Stock Price Equity (in millions) Div/share (S) Yield 3.00% S 2.70% S 2.60% S 97.33 2015 2.92 2,491.00 2016 3.12 429.00 115.56 2017 3.32 1,030.00 127.69

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3. The rate of return on equity (i.e., the cost of stock) based on the new dividend yield you calculated above
Cash
Return on
Year
Div/Share
Stock Price
Investment
($)+1.75
$
$
CALCULATE ROI
2015
2016
2017
4.67
97.33
4.87
5.07
23.72% [(Dividends $1.75) (new price old price)]/ (old price)
14.89% [(Dividends $1.75) (new price - old price)]/ (old price)
115.56
$
127.69
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3. The rate of return on equity (i.e., the cost of stock) based on the new dividend yield you calculated above Cash Return on Year Div/Share Stock Price Investment ($)+1.75 $ $ CALCULATE ROI 2015 2016 2017 4.67 97.33 4.87 5.07 23.72% [(Dividends $1.75) (new price old price)]/ (old price) 14.89% [(Dividends $1.75) (new price - old price)]/ (old price) 115.56 $ 127.69

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Expert Answer

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The increase in cash dividend would increase the dividend yield of the stock. For Year 2016, dividend increased from $3.12 to $4.87. So, the dividend yield for the stock i...

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