Question
Martian Airways Inc. has a 12% required rate of return. It does not expect to initiate dividends for 15 years, at which time it will
Martian Airways Inc. has a 12% required rate of return. It does not expect to initiate dividends for 15 years, at which time it will pay $2.00 per share in dividends. At that time, Martian Airways expects its dividends to grow at 7% forever. What is an estimate of Martian Airways' price in 15 years (P15) if its dividend at the end of year 15 is $2.00? (6 marks) (b) Mind-The-Gap Corp. is selling for $30 a share. In looking at the stream of dividends over the past ten years, you find out that the first dividend was $1.00 and the last dividend was $2.00. What is the firm's growth rate of dividends? What is the firm's expected return? (8 marks) (c) Discuss the THREE (3) forms of market efficiency.
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