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Red Burns Brighter Inc., the worlds largest producer of red light bulbs, reported earnings per share of $1.60 in 2017, and paid dividends of $0.70
Red Burns Brighter Inc., the worlds largest producer of red light bulbs, reported earnings per share of $1.60 in 2017, and paid dividends of $0.70 that year. The firm was expected to report earnings growth of 25% next year, after which the growth rate was expected to decline linearly over the next twelve years to an eventual stable growth rate of 2.75%. Assume a beta of 1.1, a risk-free rate of 2.5%, and an equity risk premium of 5.5%. Estimate the stock price using the H-model.
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