Question

3A. The Waffle House pays a constant annual dividend of $1.25 per share. How much are you willing to pay for one share if you require a 25 percent rate of return? 3B. The Waffle House is going to pay annual dividend of $1.25 per share in year one and the constant growth rate is 5%. How much are you willing to pay for one share if you require a 25 percent rate of return? 3C. The Waffle House just paid annual dividend of $1.25 per share and the constant growth rate is 5%. How much are you willing to pay for one share if you require a 25 percent rate of return?

Answer 1

Answer:

$5.00

Explanation:

Calculation to determine How much are you willing to pay for one share if you require a 25 percent rate of return

Using this formula

Amount willing to pay=Annual dividend/Rate of return

Let plug in the formula

Amount willing to pay=$1.25/0.25

Amount willing to pay=$ 5.00

Therefore amount willing to pay for one share if you require a 25 percent rate of return will be $5.00