Question

What is the current share price of Indigo River Consulting stock if it is expected to...

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.

Homework Answers

Answer #1

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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