Maritime Bank recently announced that its next semiannual dividend (to be paid six months from now) will
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Maritime Bank recently announced that its next semiannual dividend (to be paid six months from now) will be $1 per share. A stock analyst's best estimate for the growth in future dividends is 4% compounded semiannually.
a. If you require a rate of return of 5.8% compounded semiannually on the stock, what maximum price should you be willing to pay per share? Ignore the present value of dividends beyond a 50-year time horizon.
b. What price do you obtain if you do not ignore dividends beyond 50 years? Use a large value, say 1000, for n in the present value calculation.
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Related Book For
Fundamentals Of Business Mathematics In Canada
ISBN: 9781259370151
3rd Edition
Authors: F. Ernest Jerome, Jackie Shemko
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