Question

Show Boat Dinner Theatres has paid annual dividends of $0.32, $0.52, and $0.60 a share over the past three years, respectively. The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively flat. Given the lack of future growth, you will only buy this stock if you can earn at least a 19 percent rate of return. What is the maximum amount you are willing to pay for one share of this stock today

Answer 1

$3.16

Step-by-step explanation:

Since in the question it is given that the company wants to maintain a constant dividend.

So, the maximum amount you are willing to pay for one share is

= $0.60 ÷ 19%

= $3.16

We simply divide the dividend for 3 year by the earning rate of return so that the maximum price could come

All the other information which is given is not relevant. Hence, ignored it