Question

Jia Inc., has an odd dividend policy. The company has just paid a dividend of $4 per share and has announced that it will increase the dividend by $5 per share for each of the next four years, and then never pay another dividend. If you require a return of 12% on the company's stock, how much will you pay for a share today?

Answer 1

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Answer 2

Jia Inc. current stock value is $ 4.48

Further Explanation

Stock price = value to be paid at this time (now)

Whereas the dividend and selling price are $ 4 a year later so that the present value is needed

Stock price = ($ 4 + $ 0.48) / (1 + 12%) = $ 4.48

Thus, the maximum price you dare pay for the stock is $ 4.48

This means that if the stock is offered at a price above $ 4.48, then it is rejected and vice versa if the stock is offered at a price below $ 4.48, the stock is purchased.

Features of Common Stock

1. Voting Rights
2. The right to be represented if unable to attend the RUPS (proxy rights)
3. Right to Pre-emptive Shares, namely when an issuer issues new shares, old shareholders can buy new shares (if desired) offered according to the portion of their shares so that the composition of ownership remains the same
4. Stock Type
5. Other rights
6. Dividends distributed according to the proportion of shares owned proportionally.
7. The distribution of the remaining assets during liquidation (company liquidation) also depends on the proportion of shares owned proportionally.

Learn More

Current Stock Value  https://brainly.com/question/14005380

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Detail

Class: Middle School

Subject: Mathematics

Keywords: stock, value, price