Suppose that KMS in Problem 4 decides to initiate a dividend instead, but it wants the present value of the payout to be the same $20 million If its cost of equity capital is 10 , to what amount per year in perpetuity should it commit (assuming perfect capital markets) ...

Plan Determine the present value of the annuity of div ...

Suppose that KMS in Problem 4 decides to initiate a dividend instead, but it wants the present

Question:

Suppose that KMS in Problem 4 decides to initiate a instead, but it wants the present value of the payout to be the same $20 million. If its capital is 10%, to what amount per year in should it commit (assuming perfect capital markets)?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Perpetuity
Perpetuity refers to payments that are made without an end or maturity date. A perpetuity is classified as an annuity, which is something that earns a dividend or receives a payment at a regularly scheduled interval, generally yearly. So, how...