what is the most you would be willing to pay per share?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 5P: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s...
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Prima Corporation's dividend per share next year is expected to be $3.02
and the firm expects dividends to grow at a rate of 5% per year for the
foreseeable future.
If you can earn 13% on similar-risk investments, what is the most you would
be willing to pay per share? If you can earn only 10% on similar-risk
investments, what is the most you would be willing to pay per share?
Compare and contrast your findings, and explain the impact of changing
risk on share value.
Transcribed Image Text:Prima Corporation's dividend per share next year is expected to be $3.02 and the firm expects dividends to grow at a rate of 5% per year for the foreseeable future. If you can earn 13% on similar-risk investments, what is the most you would be willing to pay per share? If you can earn only 10% on similar-risk investments, what is the most you would be willing to pay per share? Compare and contrast your findings, and explain the impact of changing risk on share value.
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