question archive 3) Assume ShameXL pays an annual dividend of $3
3) Assume ShameXL pays an annual dividend of $3
Subject:AccountingPrice:2.86 Bought8
3) Assume ShameXL pays an annual dividend of $3.50 and has a share price of $84.50. It announces that its annual dividend will increase to $4.75. If its dividend yield is to stay the same, what should its new share price be? 4) Company DDD will pay a dividend of $2.50 this year. If you expect DDD's dividend to grow by 7% per year, what is its price per share if the firm's equity cost of capital is 13%?
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3)
- Dividend Yield = Dividend/Share Price
- Dividend Yield = $3.50/$84.50
- Dividend Yield = 4.14%
- Price = Dividend/Dividend Yield
- Price = $4.75/4.14%
- Price = $114.68 (Rounding off difference) or $114.73
4)
- Cost of Capital = D1/(r - g)
- Cost of Capital = ($2.50 x 1.07)/(13% - 7%)
- Cost of Capital = $44.58
