In Response to the Stock Market's Reaction to Its Dividend

question 14

Essay

In response to the stock market's reaction to its dividend policy, the Nico's Toy Company has decided to increase its dividend payment at a rate of 4 percent per year. The firm's most recent dividend is $3.25 and the required rate of interest is 9 percent. What is the maximum you would be willing to pay for a share of the stock?

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Definitions:

1934 Act

The Securities Exchange Act of 1934, a U.S. federal law that regulates the secondary trading of securities (stocks, bonds, and debentures) in the United States, established to increase transparency and reduce fraud.

1934 Act

Refers to the Securities Exchange Act of 1934, which regulates the trading of securities such as stocks and bonds in the U.S. and established the Securities and Exchange Commission.

Issuer

An entity that develops, registers, and sells securities to finance its operations, which can be corporations, governments, or municipal bodies.

Investors

People or organizations that invest money with the aim of achieving financial gains.