Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

9. National Warehousing just announced it is increasing its annual dividend to $

ID: 2711007 • Letter: 9

Question

9. National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter. How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

9. National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter. How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

9. National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter. How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

Explanation / Answer

D1 $                            1.18 D2 $                            1.22 D3 $                            1.26 D4 $                            1.30 D5 $                            1.34 D6 $                            1.38 D7 $                            1.43 D8 $                            1.48 D9 $                            1.52 P8 $                          24.38 1.52/(9.5%-3.25%) Hence, required share price is $24.38