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1. Three Eyed Raven PLC is a technology company. Its dividends per share are expected to grow indefinitely at a rate of 7% per year.
1. Three Eyed Raven PLC is a technology company. Its dividends per share are expected to grow indefinitely at a rate of 7% per year. Answer the following: (a) If this year's year-end dividend is 12 and the market required rate of return is 9% per year, what must the current stock price be according to the Gordon Growth Model? [2 marks] (b) If the expected earnings per share are 36, what is the implied value of the return on future investment opportunities? [4 marks] (c) How much is the market paying per share for growth opportunities (i.e., for a return on future investments that exceeds the market required rate of return rate)? [4 marks] 1. Three Eyed Raven PLC is a technology company. Its dividends per share are expected to grow indefinitely at a rate of 7% per year. Answer the following: (a) If this year's year-end dividend is 12 and the market required rate of return is 9% per year, what must the current stock price be according to the Gordon Growth Model? [2 marks] (b) If the expected earnings per share are 36, what is the implied value of the return on future investment opportunities? [4 marks] (c) How much is the market paying per share for growth opportunities (i.e., for a return on future investments that exceeds the market required rate of return rate)? [4 marks]
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