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A firms earnings and dividends are expected to grow at a constant rate indefinitely, and it is expected to pay

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A firm’s earnings and dividends are expected to grow at a constant rate indefinitely, and it is expected to pay a dividend of $8.75 per share next year. Expected EPS and BVPS next year are $12 and $48, respectively. The cost of equity is 10 percent and there are 10,000 shares outstanding. Calculate the firm’s value, assuming that the retention ratio stays the same and the market value of debt is $500,000.

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...

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Introduction To Corporate Finance

Introduction To Corporate Finance

ISBN: 9781118300763

3rd Edition

Authors: Laurence Booth, Sean Cleary

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Question Posted: February 25, 2015 09:57:37
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