Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

a.) Suppose the risk-free rate is 3.73% and an analyst assumes a market risk premium of 6.57%. Firm A just paid a dividend of $1.35

a.) Suppose the risk-free rate is 3.73% and an analyst assumes a market risk premium of 6.57%. Firm A just paid a dividend of $1.35 per share. The analyst estimates the of Firm A to be 1.23 and estimates the dividend growth rate to be 4.92% forever. Firm A has 264.00 million shares outstanding. Firm B just paid a dividend of $1.68 per share. The analyst estimates the of Firm B to be 0.90 and believes that dividends will grow at 2.07% forever. Firm B has 181.00 million shares outstanding. What is the value of Firm A?

b.) Suppose the risk-free rate is 2.89% and an analyst assumes a market risk premium of 6.66%. Firm A just paid a dividend of $1.36 per share. The analyst estimates the of Firm A to be 1.23 and estimates the dividend growth rate to be 4.98% forever. Firm A has 294.00 million shares outstanding. Firm B just paid a dividend of $1.81 per share. The analyst estimates the of Firm B to be 0.71 and believes that dividends will grow at 2.18% forever. Firm B has 196.00 million shares outstanding. What is the value of Firm B?

SHOW ANSWERS CLEARLY AND WRITE THEM OUT INTO THEIR FULL FORM!!!

example: NO!!! 5.88 MILLION WRITE IT ALL OUT PLEASE!!! show all decimal places

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

Contact information for the American Management Association

Answered: 1 week ago

Question

How do proposal writers use an RFP? [LO-7]

Answered: 1 week ago