Question

City Equipment announced this morning that its next annual dividend will be decreased to $1.90 a share and that all future dividends will be decreased by an additional 1.9 percent annually. What is the current value per share if the required return is 16.8 percent?

Answer 1

Answer:

$10.16

Explanation:

Calculation for What is the current value per share if the required return is 16.8 percent

Using this formula

Current value per share Decreased in Annual dividend/Decreased in future dividends +Required return

Let plug in the formula

Current value per share =$1.90/1.9 percent+16.8 percent

Current value per share =$1.90/0.187

Current value per share =$10.16

Therefore the current value per share if the required return is 16.8 percent will be $10.16