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You are trying to estimate the share price for AirStream Inc. You have forecasted the following information about earnings per share and dividends per share
You are trying to estimate the share price for AirStream Inc. You have forecasted the following information about earnings per share and dividends per share for the next five years (see table below). In addition, you know that after year 5 the company will maintain a constant payout rate of 30% in perpetuity. The company's equity cost of capital (rE) is 16%, its return on new investment is 20%, and it currently has 250 million shares outstanding. Assume the company only pays dividends and does not repurchase shares. Based on the information provided, what is a good estimate for the firm's share price? Select the best one. I. $0.08 II. $68.93 III. $7.93 IV. $19.27 V. $38.05
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