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Common stock
valueConstant
growthPersonal Finance ProblemOver the past 6 years, Elk County Telephone has paid the dividends shown in the following table,
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. The firm's dividend per share in
2023
is expected to be
$4.02.
a.If you can earn
14%
on similar-risk investments, what is the most you would be willing to pay per share in
2022,
just after the
$3.83
dividend?b.If you can earn only
11%
on similar-risk investments, what is the most you would be willing to pay per share?
c.Compare your findings in parts a and b, what is the impact of changing risk on share value?
a.If you can earn
14%
on similar-risk investments, the most you would be willing to pay per share is
$nothing.
(Round to the nearest cent.)b.If you can earn
11%
on similar-risk investments, the most you would be willing to pay per share is
$nothing.
(Round to the nearest cent.)c.According to the findings in parts a and b, as risk decreases, the required rate of return
increases
increases
decreases
, causing the share price to
rise
fall
rise
. (Select from the drop-down menus.)
Answer & Explanation
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