The ABC company, based in Colchester, is considering a policy of paying 1 0 0 % of
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Question:
The ABC company, based in Colchester, is considering a policy of paying of its earnings
as dividends. The data for the firm are given in the following table. Use this information to answer the questions.
Annual Earnings : mill
Annual Earnings Growth :
Earnings Growth Forecast : zero growth is expected to increase indefinitely
riskfree interest rate:
Expected Return on the market:
Beta:
Shares Outstanding: mill
a What is the price per share of ABC?
b Suppose the firm switches its payout policy to pay of earnings as dividends
instead of The retained earnings are reinvested at the cost of capital for the
firm. What is dividend growth now?
c What is the value per share now?
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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