Question
Company Z's earnings and dividends per share are expected to grow indefinitely by 4% a year. Assume next year's dividend per share is $18. The
Company Z's earnings and dividends per share are expected to grow indefinitely by 4% a year. Assume next year's dividend per share is $18. The cost of equity is 12%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $3 a share. How much is the market actually paying per share for growth opportunities?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Company Z's earnings and dividends per share are expected to grow indefinitely by 4% a year. Assume next year's dividend per share is $18. The cost of equity is 12%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $3 a share. How much is the market actually paying per share for growth opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places Step by Step Solution
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Key Financial Market Concepts
Authors: Bob Steiner
2nd Edition
0273750127, 978-0273750123
