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Ivahew [28]
2 years ago
4

You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate of return to compensate for the perceived risk.

What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $1.25 annual dividend per share?9.38$9.11$8.62$9.26$8.47
Business
1 answer:
velikii [3]2 years ago
8 0

Answer:

$8.62

Explanation:

In order to calculate this you just have to do a rule of thirds, in this case you need a 14.5% of rate return to compensate for the risk, so that 14.5% should be equal to the annual dividend, so 14.5%=1.25 how much would the 100% would be and that is the cost per share:

\frac{1.25}{14.5} =\frac{x}{100}\\ x=\frac{1.25(100)}{14.5} \\x=\frac{125}{14.5}\\ x=8.62

So we now know that the maximum per share that you would be willing to pay would be 8.62 dollars.

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