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Company ADF has been paying a dividend of $1.25 per quarter for several years. Its management plans to continue with this dividend for two more quarters and then to start increasing its dividend by 1% per quarter, with the first increase in the third quarter of this year. The planned increase in dividends will be announced today. If IBQ stock currently requires a return of 18% effective per year, how much should its stock price increase when the company makes the announcement? (A)$4.40 (B)$6.94 (C)$8.80 (D)none of the above (E)$5.50

Company ADF has been paying a dividend of $1.25 per quarter for several years. Its management plans to continue with this dividend for two more quarters and then to start increasing its dividend by 1% per quarter, with the first increase in the third quarter of this year. The planned increase in dividends will be announced today. If IBQ stock currently requires a return of 18% effective per year, how much should its stock price increase when the company makes the announcement? (A)$4.40 (B)$6.94 (C)$8.80 (D)none of the above (E)$5.50

FINANCIAL ACCOUNTING
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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Company ADF has been paying a dividend of $1.25 per quarter for several years. Its management plans to continue with this dividend for two more quarters and then to start increasing its dividend by 1% per quarter, with the first increase in the third quarter of this year. The planned increase in dividends will be announced today. If IBQ stock currently requires a return of 18% effective per year, how much should its stock price increase when the company makes the announcement? (A)$4.40 (B)$6.94 (C)$8.80 (D)none of the above (E)$5.50
Transcribed Image Text:Company ADF has been paying a dividend of $1.25 per quarter for several years. Its management plans to continue with this dividend for two more quarters and then to start increasing its dividend by 1% per quarter, with the first increase in the third quarter of this year. The planned increase in dividends will be announced today. If IBQ stock currently requires a return of 18% effective per year, how much should its stock price increase when the company makes the announcement? (A)$4.40 (B)$6.94 (C)$8.80 (D)none of the above (E)$5.50
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