JEN Corp. is expected to pay a dividend of $6.00 per year indefinitely. If the appropriate rate of return on this stock is 8% per year, and the stock consistently goes ex-dividend 20 days before dividend payment date, what will be the expected minimum price in light of the dividend payment logistics?
The scientist named "Gordon" has developed the dividend based pricing model. The share price is determined under different methods i.e. dividend payment model, growing dividend payment model, earnings per share model, and growing earnings per share model.
Answer and Explanation:
The expected minimum price in light of the dividend payment logistics is $75.
Explanation: The expected minimum price in light of the dividend payment logistics is $75 ($6/8%), which has computed by dividing the annual dividend by annual appropriate rate of return on the stock.
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from Corporate Finance: Help & ReviewChapter 2 / Lesson 10