Chalk Dust Disposal Inc. has $10 cash and operates an incinerator that generates free cash flow of

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Chalk Dust Disposal Inc. has $10 cash and operates an incinerator that generates free cash flow of $5 per year in perpetuity (starting in 1 year). Chalk Dust is all-equity financed, its shareholders require a return of 10%, and it has 100 shares outstanding. The company is considering paying a dividend of $0.1 per share.

What is the stock price before the dividend and what is the price after the dividend?

Related Book For answer-question

Fundamentals of Corporate Finance

ISBN: 978-0133400694

1st canadian edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi

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Posted Date: Dec 02, 2023 11:14 AM

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Chalk Dust Disposal Inc. has $10 cash and operates an incinerator that generates free cash flow of

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The stock price before the dividend can be calculated using the Gordon Growth Model which is ... View the full answer

Fundamentals of Corporate Finance

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