Problem: Common stock value-Constant growth Elk County Telephone has paid the dividends shown in the following table over the past 6 years.
Year Dividend per share
2006 $2.87
2005 2.76
2004 2.60
2003 2.46
2002 2.37
2001 2.25
The firm's dividend per share next year is expected to be $3.02.
1. If you can earn 13% on similar-risk investments, what is the most you would be willing to pay per share?
2. If you can earn only 10% on similar-risk investments, what is the most you would be willing to pay per share?
3. Compare and contrast your findings in parts a and b, and discuss the impact of changing risk on share value.