Fincorp will pay a year-end dividend of $2.40 per share, which is expected to grow at a

Question:

Fincorp will pay a year-end dividend of $2.40 per share, which is expected to grow at a 4%

rate for the indefinite future. The discount rate is 12%.

a. What is the stock selling for?

b. If earnings are $3.10 a share, what is the implied value of the firm’s growth opportunities?

Dividend per share...$2.40

Expected growth rate...400%

Discount rate .......12.00%

Earnings per share... (b)$3.10

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...