What is the current share price of Indigo River Consulting stock if it is expected to pay a dividend of 4.92 dollars every quarter forever, the stock’s expected return is 8.16 percent per year, and the next dividend is expected in 3 months? What is the expected dividend for Indigo River Consulting expected to be in 3 months if the stock is expected to pay a constant dividend every quarter forever, the expected return is 17.24 percent per year, the next dividend is expected in 3 months, and the stock is priced at 91.42 dollars? Indigo River Consulting has a stock has a price of 88.79 dollars and an expected annual return of 16.37 percent. The stock is expected to pay a constant dividend forever with the next annual dividend expected in 1 year. What is the present value of the annual dividend that is expected to be paid in 3 years from today? What is the expected annual return for a stock at Indigo River Consulting that is priced at 95.41 dollars, is expected to pay a dividend of 2.3 dollars every quarter forever, and is expected to pay its next dividend in 3 months? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
Solution:
1.Calculation of share price of Indigo River Consulting
diviend per quarter=$4.92
Required rate of return=8.16% per year or 2.04 per quarter
Share Price=diviend per quarter/Required rate of return per quarter
=$4.92/2.04%
=$241.18
2.Calculation of expected dividend for Indigo River Consulting
Share Price=$91.42
Required rate of return per quarter=17.24%/4=4.31%
Dividend in next 3 month=Share Price*Required rate of return per quarter
=$91.42*4.31%
=$3.94
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