The price of a share

The HNH Corporation will pay a constant dividend of $2 per share, per year, in perpetuity. Assume all investors pay a 20% tax on dividends and that there is no capital gains tax. The cost of capital for investing in HNH stock is 12%.

a. What is the price of a share of HNH stock?

b. Assume that management makes a surprise announcement that HNH will no longer pay dividends but will use the cash to repurchase stock instead.

What is the price of a share of HNH stock now?

Solution:

Looking for help with your homework?
Grab a 30% Discount and Get your paper done!

30% OFF
Turnitin Report
Formatting
Title Page
Citation
Place an Order

Calculate your paper price
Pages (550 words)
Approximate price: -
AllEscortAllEscort