Question
Assume you expect New Hanover Corp. to pay a dividend of $1.50 a year from today. Assume also that you expect dividends to grow by
Assume you expect New Hanover Corp. to pay a dividend of $1.50 a year from today. Assume also that you expect dividends to grow by 20% per year for 5 years and then to grow at 3% per year thereafter forever. Based on these assumptions and assuming an equity cost of capital for New Hanover, you estimate the value of New Hanovers stock as $103 per share. How would assuming a higher equity cost of capital for New Hanover affect your estimate of the value of New Hanover stock? Note: You only need to state the direction of the change. Dont try to calculate the amount of the change.
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