Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Microsoft decides to spin off its Office products into a separate division because they feel they are at a mature stage of growth. The new
Microsoft decides to spin off its "Office" products into a separate division because they feel they are at a mature stage of growth. The new company's earnings and dividends are expected to grow at a constant rate of 3% per year. If the initial dividend for the end of the first year is $4 and the company's weighted average cost of capital is 8%, what is the fair value of the new company's stock?
$100 | ||
$50 | ||
$133.33 | ||
$82.40 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started