Question
Your company will produce a free cash flow for equity holders (FCFE) equal to 5 millions this year and 10 millions next year when the
Your company will produce a free cash flow for equity holders (FCFE) equal to 5 millions this year and 10 millions next year when the company will be liquidated. You own 5% of the equity of the company. The company is planning to pay out more than the FCFE at the end of the first year by issuing 3,000,000 worth of new equity (assume that the money raised via equity issuance is used to pay the dividend to both current and new shareholders). If the equity expected return is 9% and there are 500,000 shares outstanding, what are the dividends paid at the end of the first and the second year?
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