The common stock of KLM Co. paid $2.00 as dividends last year and the dividends are expected to grow at a rate of 30% per
The common stock of KLM Co. paid $2.00 as dividends last year and the dividends are expected to grow at a rate of 30% per year for the first 4 years. After 4 years, the grow rate decreases to 10% and dividends are expected to grow forever.
a. If the discount rate is 12%, what is the price of the stock today?
b. If the KLM companys earnings per share will be $4.00 in year 1, what is the value of growth opportunities?
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Authors: Mike E. Miles, Laurence M. Netherton, Adrienne Schmitz
5th Edition
0874203430, 978-0874203431
