(b) The company is also considering offering additional common shares in the market. However Insignia is concerned about whether its stock is fairly valued on the market. As such, its Finance Manager has undertaken an exercise to determine the current price of its common shares based on the following anticipated dividend payout structure: V Insignia's last dividend paid was $4.20. V The company intends to increase the dividend by 10%, 15% and 20% respectively over the next three (3) years. V Thereafter, the company is expected to increase dividends by an annual rate of 2%. The company continues to assume a required return of 12%. Required: Given the above, what should be the current price of Insignia's common shares?

(b) The company is also considering offering additional common shares in the market. However Insignia is concerned about whether its stock is fairly valued on the market. As such, its Finance Manager has undertaken an exercise to determine the current price of its common shares based on the following anticipated dividend payout structure: V Insignia's last dividend paid was $4.20. V The company intends to increase the dividend by 10%, 15% and 20% respectively over the next three (3) years. V Thereafter, the company is expected to increase dividends by an annual rate of 2%. The company continues to assume a required return of 12%. Required: Given the above, what should be the current price of Insignia's common shares?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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