Question
After successfully earning returns in the bond market, Sarah is now considering a much riskier investment. She is considering the valuation of a share of
After successfully earning returns in the bond market, Sarah is now considering a much riskier investment. She is considering the valuation of a share of ADNOC common stock that paid a 2 AED dividend at the end of last year and is expected to pay a cash dividend every year from now to infinity. Each year the dividend payout ratio (D1/E1) is expected to be 5% and the return on equity earned when the firm reinvests a portion of its earnings back into the firm (ROE) is 10.53%. Based on an assessment of the riskiness of the common stock, the investors required rate of return is 15 percent. What is the value of this ADNOC common stock?
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