Assume that Summa Corporation is currently paying $1 per share in dividends and investors expect dividends to

Question:

Assume that Summa Corporation is currently paying $1 per share in dividends and investors expect dividends to grow at the rate of 7 percent a year for the foreseeable future. For investments at this risk level, investors require a return of 15 percent a year. The estimated value of Summa today, V₀ , is

Vo Vo 11 D k-g $1.00 (1.07) 0.15-0.07 = $13.38