Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividen
ID: 2706602 • Letter: H
Question
Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $9.00 per share and has announced that it will increase the dividend by $7.00 per share for each of the next four years, and then never pay another dividend.
If you require a return of 12 percent on the company
Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $9.00 per share and has announced that it will increase the dividend by $7.00 per share for each of the next four years, and then never pay another dividend.
Required:If you require a return of 12 percent on the company
Explanation / Answer
price today = 9/1.12 + 16/(1.12^2) + 23/(1.12^3) +30/(1.12^4) + 37/(1.12^5)
=8.03+12.76+16.37+19.07+21
=77.23
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