Constant growth Over the past 6 years, Elk County Telephone has paid the dividends shown in the

Question:

Constant growth Over the past 6 years, Elk County Telephone has paid the dividends shown in the following table.

Year Dividend per share
2019....................................... $2.87
2018....................................... 2.76
2017....................................... 2.60
2016....................................... 2.46
2015....................................... 2.37
2014....................................... 2.25

The firm’s dividend per share in 2020 is expected to be $3.02.
a. If you can earn 13% on similar-risk investments, what is the most you would be willing to pay per share in 2019, just after the $2.87 dividend?
b. If you can earn only 10% on similar-risk investments, what is the most you would be willing to pay per share?
c. Compare and contrast your findings in parts a and b, and discuss the impact of changing risk on share value.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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