b. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? Check your estimate of share value by discounting this stream of dividends per share.
b. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? Check your estimate of share value by discounting this stream of dividends per share.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
NEED PART B ANSWERED CORRECTLY
Transcribed Image Text:House of Haddock has 5,090 shares outstanding and the stock price is $149. The company is expected to pay a dividend of $29 per
share next year and thereafter the dividend is expected to grow indefinitely by 2% a year. The president, George Mullet, now makes a
surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder
will be used to repurchase stock. The repurchased stock will not be entitled to the dividend.
a-1. What is the total value of the company before the announcement?
a-2. What is the total value of the company after the announcement?
a-3. What is the value of one share?
b. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the
company? Check your estimate of share value by discounting this stream of dividends per share.
Complete this question by entering your answers in the tabs below.
Req A1 to A3 Req B
What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back
to the company? Check your estimate of share value by discounting this stream of dividends per share. (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Year
1
2
Expected
Dividend per
share
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