The ordinary shares of Park Plc are currently trading at 80p. The last dividend per share was 15p and its dividends have been constant for ten years. The company plans to finance a new investment project out of retained earnings and so for the next two years the dividend per share will fall to 10p. Benefits from the investment project will be gained from year three onwards and so Park will pay a dividend of 18p per share in that year and subsequent years. Assuming that shareholders have all the above information, what would be a fair price for the shares of Park Plc?
The ordinary shares of Park Plc are currently trading at 80p. The last dividend per share was 15p and its dividends have been constant for ten years. The company plans to finance a new investment project out of retained earnings and so for the next two years the dividend per share will fall to 10p. Benefits from the investment project will be gained from year three onwards and so Park will pay a dividend of 18p per share in that year and subsequent years. Assuming that shareholders have all the above information, what would be a fair price for the shares of Park Plc?
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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The ordinary shares of Park Plc are currently trading at 80p. The last dividend per
share was 15p and its dividends have been constant for ten years. The company
plans to finance a new investment project out of
next two years the dividend per share will fall to 10p. Benefits from the
investment project will be gained from year three onwards and so Park will pay a
dividend of 18p per share in that year and subsequent years.
Assuming that shareholders have all the above information, what would be
a fair price for the shares of Park Plc?
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