Question
You want to estimate the total intrinsic value of a large gas and electric utility company. This company has publicly traded stock and has been
You want to estimate the total intrinsic value of a large gas and electric utility company. This company has publicly traded stock and has been paying a regular dividend for many years. You decide that, due to the predictability of the dividend that this company pays, you can use the dividend discount valuation approach. The company is expected to pay a dividend of $1.40 per share next year, and the dividend is expected to grow at a rate of 5 percent per year thereafter. You estimate that the appropriate rate for discounting future dividends is 11 percent. In addition, you know that the company has 42 million shares outstanding and that the market value of its debt is $320 million. What is the total enterprise value of the company? (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)
The total value of the company is $_____________million.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started