Question

Assume Coleco pays an annual dividend of $1.49 and has a share price of $37.31 It...

Assume Coleco pays an annual dividend of $1.49 and has a share price of $37.31 It announces that its annual dividend will increase to $1.73. If its dividend yield stays the same, what should be its new share price?
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Answer #1

Its new share price should be   $ 43.32

Step-1:Calculation of dividend yield
Dividend Yield = Annual dividend / Share Price
= $       1.49 / $    37.31
= 3.99%
Step-2:Calculation of new share price
New Share Price = New Dividend / Dividend Yield
= $       1.73 / 3.99%
= $    43.32
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