Provide both Correct answer with Working Community Bank. Inc. Is a publicly trad

Question

Provide both Correct answer with Working

Community Bank. Inc. Is a publicly traded corporation whose shares currently pay an annual dividend ol $1.40. The shares currently trade at $11.67. and its cost of equity of 12 percent. If the bank announces that it will seek to grow its dividend by 2% per year what should be the new price of the bank's shares? Assume the following facts regarding Starlight Enterprises. the for the fiscal year just ended: Net Income: $40 million Dividend payout ratio: 50% ROE: 14% Outstanding shares: 10 million What was this year's dividend per share? Assuming the company maintains its payout ratio and that any cash not paid out as a dividend is invested in the company and earns the company's ROE, what is the best projection for next year's dividend per share?

Explanation / Answer

Calculation of Dividend per share Dividend Per Share = Total Dividend/ Net Income .50 = Total Dividend/ 40 Total Dividend = 40*.50 Total Dividend = 20 Million Dividend Per Share = Total Dividend/ Total Outstanding Shares Dividend per share = 20/10 Dividend per share = $ 2 per share

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