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Question 9 3 Points Merck Group, a pharmaceutical company listed on the Dax 30 index, is reinvesting 50% of its earnings to expand its operations.
Question 9 3 Points Merck Group, a pharmaceutical company listed on the Dax 30 index, is reinvesting 50% of its earnings to expand its operations. The company has recently declared earnings of 40 cents per share and pays 50% of its annual earnings as dividends. Earnings and dividends are expected to grow at a rate of 8% for the next five years. Afterwards, expected competition from other pharmaceutical companies will cause the growth rate to fall to 4% per annum in perpetuity. Existing investors of Merck Group demand a rate of return of 14% on the company's shares. What is the current share price of Merck Group? A 1.24 B 6.65 C 4.40 D) 2.44 E None of the above
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