ing company is required to determine the cost of capital for its common shares. The company expects to pay a dividend of $ 1.45 by the end of the year (2021). The following table shows the dividends for the last 5 years. Year Dividend 2020 $ 1.3 2019 1.2 2018 1.1 2017 1 2016 0.98 2015 0.90 After administrative costs, the company e
ing company is required to determine the cost of capital for its common shares. The company expects to pay a dividend of $ 1.45 by the end of the year (2021). The following table shows the dividends for the last 5 years. Year Dividend 2020 $ 1.3 2019 1.2 2018 1.1 2017 1 2016 0.98 2015 0.90 After administrative costs, the company e
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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A trucking company is required to determine the cost of capital for its common shares. The company expects to pay a dividend of $ 1.45 by the end of the year (2021). The following table shows the dividends for the last 5 years.
Year Dividend
2020 $ 1.3
2019 1.2
2018 1.1
2017 1
2016 0.98
2015 0.90
After administrative costs, the company expects to earn $ 25 per share from a new issue and has a 15% market rate.
a) Determine the growth rate of dividends from 2016 to 2020. (g =?)
b) Determine the value or price of the shares
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