Asked by Emilio Paderanga on Apr 25, 2024
Priscilla owns 500 shares of Delta stock. The company recently issued a statement that it will pay a $1.00 per share dividend this year and a $.50 per share dividend next year. Priscilla does not want any dividend this year but does want as much dividend income as possible next year. Her required return on this stock is 12 percent. Ignoring taxes, what will Priscilla's homemade dividend per share be next year?
A) $0
B) $.50
C) $1.50
D) $1.62
E) $1.68
Dividend Income
Income received from owning shares of a company in the form of dividends.
Required Return
The minimum annual percentage earned by an investment that will induce individuals or companies to put their money into a particular project or investment.
- Interpret the effects of changes in dividend policies on shareholder value and company capital structure.
Learning Objectives
- Interpret the effects of changes in dividend policies on shareholder value and company capital structure.