You are financial analyst in Cairo Equity, and your boss wants your advice on the potential stock purchase of Universal Tires - a company, which comes with an exceptional offer of paying a constant dividend of $120 per year. While the Egyptian economy is in Boom, inflation is 9%, and the banks are offering an average real interest rate of 2.5%. Would you be in favor of this purchase? If 'Yes', what price would you suggest at maximum to be payed for the stocks? Explain your answer
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
You are financial analyst in Cairo Equity, and your boss wants your advice on the potential stock purchase of Universal Tires - a company, which comes with an exceptional offer of paying a constant dividend of $120 per year. While the Egyptian economy is in Boom, inflation is 9%, and the banks are offering an average real interest rate of 2.5%. Would you be in favor of this purchase? If 'Yes', what price would you suggest at maximum to be payed for the stocks? Explain your answer
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