You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate

Question

You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate of return to compensate for the perceived risk. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $1.25 annual dividend per share?

You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate of return to compensate for the perceived risk. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $1.25 annual dividend per share?

Explanation / Answer

Given,

Req rate = 14.5%

Dividend per share = $1.25

Max investment = 1.25/14.5% = 8.62$

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