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You are analyzing a large stable company. For the year ending 12/31/05, the company reported earnings of $58,900 and book value at the end of
You are analyzing a large stable company. For the year ending 12/31/05, the company reported earnings of $58,900 and book value at the end of 2005 was $371,700. You expect earnings to grow at 5% a year in perpetuity, and the dividend payout ratio of 70% to continue. The company borrows at 8%, and has a cost equity of 12%. The company has 25,000 shares outstanding. What is the estimate of price per share using the dividend discount model at 12/31/05?
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