6. Miller Brothers Hardware paid an annual dividend of $0.95 per share last mont
ID: 2710999 • Letter: 6
Question
6. Miller Brothers Hardware paid an annual dividend of $0.95 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 13 percent rate of return, how much are you willing to pay to purchase one share of this stock today?6. Miller Brothers Hardware paid an annual dividend of $0.95 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 13 percent rate of return, how much are you willing to pay to purchase one share of this stock today?
6. Miller Brothers Hardware paid an annual dividend of $0.95 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 13 percent rate of return, how much are you willing to pay to purchase one share of this stock today?
Explanation / Answer
Purchase Price = Dividend/ Ke-g D1= .95*102.6% 0.9747 Price = .9747/.13-.026 = .9747/.104 9.372115 The price of the stock will be approximately $ 9.37
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