Suppose that a firm’s recent earnings per share and dividend per share are $2.60 and $1.60, respectively. Both are expected to grow at 10 percent. However, the firm’s current P/E ratio of 25 seems high for this growth rate. The P/E ratio is expected to fall to 21 within five years.

Compute the dividends over the next five years

Calculate the present value of these cash flows using a 12 percent discount rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

  

Answer rating: 100% (QA)

To calculate the dividends over the next five years we can use the given information of the initial ... View the full answer