Juniper’s Trees made two announcements concerning their common stock today. First, the company announced the next annual dividend will be $4.90 a share. Secondly, all dividends after that will increase by 0.75% annually. What is the maximum amount you sho

To determine the maximum amount to pay for a share of Juniper's Trees common stock, we need to use the dividend discount model. First, we need to calculate the expected dividend yield using the annual dividend and the current stock price. Since we don't have the current stock price, we'll use a placeholder value of $50 for now. Expected dividend yield = annual dividend / current stock price Expected dividend yield = $4.90 / $50 Expected dividend yield = 9.8% Next, we need to calculate the expected growth rate of the dividend. We know that the growth rate will be 0.75% annually, so we'll use that value. Expected growth rate = 0.75% Now we can use the dividend discount model formula to calculate the maximum amount we should pay for a share. Max stock price = next year's dividend / (required rate of return - expected growth rate) Since our goal is to earn a 15% rate of return, we can plug in those values. Max stock price = $4.90 / (15% - 0.75%) Max stock price = $4.90 / 14.25% Max stock price = $34.39 Therefore, the maximum amount you should pay to purchase a share of Juniper's Trees common stock if your goal is to earn a 15% rate of return is $34.39.