ABC Company just paid out a dividend of $2 and expects this dividend to grow indefinitely at
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ABC Company just paid out a dividend of $2 and expects this dividend to grow indefinitely at a rate of g% per year. ABC has 100,000 shares outstanding with a current market price of $26 per share. ABC’s beta is 1.5, the return on the market is 9%, and the risk-free rate is 3%. Calculate the growth rate “g” so that the market is in equilibrium (i.e., the CAPM-based return on ABC shares equals the Dividend-Growth-Model based return).
Related Book For
Intermediate Financial Management
ISBN: 978-1285850030
12th edition
Authors: Eugene F. Brigham, Phillip R. Daves
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