A firm pays dividends of $5 million once annually. Analysts expect the dividends to remain at this

Question:

"A firm pays dividends of $5 million once annually. Analysts expect the dividends to remain at this amount indefinitely. The cost of equity is 14%.

a. Calculate the value of the firm.

b. Analysts now expect that dividends will grow annually by 3%. Calculate the firm value."

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...