Question
Company ABC's earnings per share this year are $5. ABC's earnings are expected to grow at rate g every year. The return that investors expect
Company ABC's earnings per share this year are $5. ABC's earnings are expected to grow at rate g every year. The return that investors expect on ABC is 10%. ABC's current (ex-dividend) stock price is $80. ABC's payout ratio is 0.4.
(a) Determine rate g.
(b) Determine the present value of ABC's growth opportunities.
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
0135811600, 978-0135811603
