1) Sleep More Corporation has pledged to pay a $10 per share dividend every year indefinitely. if...
Question:
1) Sleep More Corporation has pledged to pay a $10 per share dividend every year indefinitely. if you require an 11% return on your investment, how much will you pay for the company's shares today?
Price of a share today (P0) = $90.91 r 11% D(0) 10
2) Refer to part (1).Suppose that SleepMore Corp. instead offered to pay a $3.40 per share dividend next year, and pledged to increase its dividend by 4.5% per year indefinitely. If you still require an 11% return on your investment, how much will you pay for the company's shares today?
Price of a share today (P0) = $75.56 D(1) 3.40 g 4.5% r 11%
3) Refer to part (2).What is the dividend yield?
4) Mattresses R Us shares currently sell for $64 per share. The market requires a 10% return on the company's shares. If the company maintains a constant 4.5% growth rate in dividends, what was the most recent dividend per share paid on the shares?
Most recent dividend (D0) =
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta