Question: Consolidated Software doesn t currently pay any dividends but is expected

Consolidated Software doesn’t currently pay any dividends but is expected to start doing so in 4 years. That is, Consolidated will go 3 more years without paying dividends and then is expected to pay its first dividend (of $3 per share) in the fourth year. Once the company starts paying dividends, it’s expected to continue to do so. The company is expected to have a dividend payout ratio of 40% and to maintain a return on equity of 20%. Based on the DVM, and given a required rate of return of 15%, what is the maximum price you should be willing to pay for this stock today?

View Solution:

Sale on SolutionInn
  • CreatedApril 28, 2015
  • Files Included
Post your question