MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.15
ID: 2749755 • Letter: M
Question
MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.15, all future dividends are expected to grow at a rate of 8 percent per year, and the firm faces a required rate of return on equity of 14 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $24.90 per share that is not expected to affect any other future dividends, what should the stock price be? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Stock price: $
MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.15, all future dividends are expected to grow at a rate of 8 percent per year, and the firm faces a required rate of return on equity of 14 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $24.90 per share that is not expected to affect any other future dividends, what should the stock price be? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Stock price: $
Explanation / Answer
PVF@14% Present value D1 $ 24.90 0.877 $ 21.84 D2 $ 2.32 P3 $ 38.70 0.877 $ 33.95 Share price $ 55.79
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