Question

Common stock value-Constant growth Personal Finance Problem Over the past 6 years, Elk County Telephone has paid the dividends shown in the following table, E. 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 your findings in parts a and b, what is the impact of changing risk on share value? a. If you can earn 13% on similar-risk investments, the most you would be willing to pay per share is $ . (Round to the nearest cent.) b. If you can earn 10% on similar-risk investments, the most you would be willing to pay per share is $ . (Round to the nearest cent.) c. According to the findings in parts a and b, as risk decreases, the required rate of return increases menus.) , the required rate of return increases ), causing the share price to fall). (Select from the (Select from the drop-down
Please show calculations

Answer 1

- Calculate the Average Annual Growth Rate. - no of years 2.81 97 = 2. Dividend 2010 - Dividendzon (1+ gaowth date ] er gans 2.87 = 2.25 (1+g)" (1+g) - 2.87 (1+g) - 1.2755 g - (1.2955) -, 2.81 2.25 1.2755 = 1.049 -|| = 0.049 = ie 5%. approx a) Price = Expected Dividend к. - 3 = 3.02 0.13-0.05 - 3.02 - 0.08 $ 37.75 Price = Expected Dividend - 3.02- = 3.02 - $ 60.40 Ke - g 0.10 -0.05 0.05