Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Scenario A) Suppose the risk-free rate is 2.95% and an analyst assumes a market risk premium of 5.23%. Firm A just paid a dividend of

Scenario A) Suppose the risk-free rate is 2.95% and an analyst assumes a market risk premium of 5.23%. Firm A just paid a dividend of $1.48 per share. The analyst estimates the of Firm A to be 1.45 and estimates the dividend growth rate to be 4.06% forever. Firm A has 271.00 million shares outstanding. Firm B just paid a dividend of $1.66 per share. The analyst estimates the of Firm B to be 0.76 and believes that dividends will grow at 2.98% forever. Firm B has 190.00 million shares outstanding. What is the value of Firm A? Answer format: Currency: Round to: 2 decimal places. Scenario B: Suppose the risk-free rate is 3.35% and an analyst assumes a market risk premium of 6.21%. Firm A just paid a dividend of $1.15 per share. The analyst estimates the of Firm A to be 1.38 and estimates the dividend growth rate to be 4.60% forever. Firm A has 271.00 million shares outstanding. Firm B just paid a dividend of $1.73 per share. The analyst estimates the of Firm B to be 0.80 and believes that dividends will grow at 2.63% forever. Firm B has 190.00 million shares outstanding. What is the value of Firm B? Answer format: Currency: Round to: 2 decimal places.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Banking

Authors: Allyn C Buzzel

11th Edition

089982689X, 9780899826899

More Books

Students also viewed these Finance questions