Question: Ritter Incorporated just paid a dividend of 2 per share

Ritter Incorporated just paid a dividend of $2 per share. Its management team has just announced a technological breakthrough that is expected to result in a temporary increase in sales, profits, and common stock dividends. Analysts expect the firm’s per-share dividends to be $2.50 next year, $3 in two years, and $3.50 in three years. After that, normal dividend growth of 5 percent is expected to resume. If shareholders expect a 15-percent return on their investment in Ritter, what should the firm’s stock price be?

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  • CreatedMarch 27, 2015
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