Question
A firm pays 25% of its earnings as dividends and has expected dividends shown below. 2021: $0.78 2022: $0.85 2023: $0.92 2024 $1.00 Assuming a
A firm pays 25% of its earnings as dividends and has expected dividends shown below.
2021: $0.78
2022: $0.85
2023: $0.92
2024 $1.00
Assuming a cost of equity of 9.6% per annum and a steady state growth of 7.5% calculate the firm's share price today (beginning of 2021) using a two-stage dividend discount model. The price today:
a.
will exceed $40.00
b.
will be between $0 and $9.99
c.
will be between $20.00 and $29.99
d.
will be between $30.00 and $39.99
e.
will be between $10.00 and $19.99
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Financial Statement Analysis
Authors: Martin S. Fridson, Fernando Alvarez
5th Edition
1119457149, 978-1119457145
