Remember that the value of a firm with cost of equity R and dividend growth g is
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Remember that the value of a firm with cost of equity R and dividend growth g is given by D(1)/(R-g), where D(1) is the dividend one year from now.
Consider a firm that had a net income NI(0)=100M last year. What would be the value of the firm under the retention rates of 20%, 40%, 60% and 80%? Assume R=20% and ROE=10%.
Related Book For
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher
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