Kenneth Cole Productions? (KCP), suspended its dividend at the start of 2009 and as of the middle of? 2012, has not reinstated its dividend

Business Aug 26, 2022

Kenneth Cole Productions? (KCP), suspended its dividend at the start of 2009 and as of the middle of? 2012, has not reinstated its dividend. Suppose you do not expect KCP to resume paying dividends until July 2014.You expect? KCP's dividend in July 2014 to be $1.15?(paid annually), and you expect it to grow by 4.5% per year thereafter. If? KCP's equity cost of capital is 11.4%?, what is the value of a share of KCP in July? 2012?

The value of a share of KCP in July of 2012 is ?$ ?? (Round to the nearest cent.)

Expert Solution

Answer:

Price for 2013=(Dividend/(cost of capital-growth rate))

=1.15/(0.114-0.045)

=$16.67(Approx)

Hence Price as on July,2012=Price of 2013/(1+cost of capital)

=16.67/1.114

=$14.96

=$15(Approx).

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