Question
Company's Z's earnings and dividends per share are expected to grow indefinitely by 2% a year. Assume next year's dividend per share is $4 and
Company's Z's earnings and dividends per share are expected to grow indefinitely by 2% a year. Assume next year's dividend per share is $4 and next year's EPS is $6. The market capitalization rate is 12%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $6 a share. How much is the market actually paying per share for growth opportunities?
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International Finance Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
10th edition
978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648
