German Resources is involved in coal mining. The company is currently profitable and is expected to pay

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German Resources is involved in coal mining. The company is currently profitable and is expected to pay a dividend of € 4 per share next year. The company has suspended exploration, however, and because its current mature operations exhaust the existing mines, you expect that the dividends paid by the company will decline forever at an 8 percent rate. The required return on German Resources stock is 11 percent. Using the DDM, estimate the value of the stock.

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...
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Equity Asset Valuation

ISBN: 978-0470571439

2nd Edition

Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen

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