Question

High valley antiques would like to issue new equity shares if its cost of equity declines to 10.5 percent. the company pays a constant annual dividend of $1.60 per share. what does the market price of the stock need to be for the firm to issue the new shares

Answer 1

The price of the share would be calculated as -

Price of share = Annual constant dividend / Cost of equity

Given, cost of equity = 10.5 %

Annual constant dividend = $ 1.60

Price of share = $ 1.60 ÷ 10.50 %

Price of share = $ 15.238 or $ 15.24