5.28 In order to buy back its own shares, Pennzoil Co. has decided to suspend its dividends...
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5.28 In order to buy back its own shares, Pennzoil Co. has decided to suspend its dividends for the next two years. It will resume its annual cash dividend of $2.00 a share 3 years from now. This level of dividends will be maintained for one more year. Thereafter, Pennzoil is expected to increase its cash dividend payments by an annual growth rate of 6% per year forever. The required rate of return on Pennzoil’s stock is 16%. According to the discounted dividend model, what should Pennzoil’s current share price be?
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Related Book For
Corporate Finance
ISBN: 9780071229036
6th International Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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