Sky, Inc. normally pays a quarterly dividend. The last such dividend paid was $2.50, all future quarterly dividends are expected to grow at 4 percent, and the firm faces a required rate of return on equity of 16.5 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $10.00 per share that is not expected to affect any other future dividends, what should the stock price be?

Question

Quizplus · Accepted Answer

The Answer of Sky, Inc. normally pays a quarterly dividend. The last such dividend paid was $2.50, all future quarterly dividends are expected to grow at 4 percent, and the firm faces a required rate of return on equity of 16.5 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $10.00 per share that is not expected to affect any other future dividends, what should the stock price be?

Sky, Inc Normally Pays a Quarterly Dividend