contestada

Tennessee Valley Antiques would like to issue new equity shares if its cost of equity declines to 12.5 percent. The company pays a constant annual dividend of $2.10 per share. What does the market price of the stock need to be for the firm to issue the new shares?a.$15.10b. $15.60c. $18.40d. $17.90e. $16.80

Respuesta :

Answer:

Stock price will be $16.8

So option (e) is the correct option

Explanation:

We have f=given expected dividend [tex]D_1=$2.10per\ share[/tex]

Required return [tex]R_e=12.50%=0.125[/tex]

Growth rate = 0 % = 0.00

We have to find the stock price [tex]p_0[/tex]

Stock price is given by

[tex]p_0=\frac{D_1}{R_e-g}=\frac{2.10}{0.125-0.00}=$16.8[/tex]

So stock price will be $16.8

So option (e) is the correct answer

Otras preguntas