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crimeas [40]
3 years ago
6

Craftwell Inc. pays a​ $0.75 dividend every quarter and will maintain this policy forever. What price should you pay for one sha

re of common stock if you want an annual return of​ 10.5% on your​ investment?
Business
1 answer:
Advocard [28]3 years ago
3 0

Answer:

Quarterly dividend (D) = $0.75

Annual return (Ke) = 10.5% = 0.105

Quarterly return = 0.105/4 = 0.02625

Current market price = <u>Quarterly dividend</u>

                                       Quarterly return

                                   =<u> $0.75</u>

                                       0.02625

                                  = $28.57

Explanation:

Current market price is the ratio of quarterly dividend paid divided by quarterly return.

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