A company currently pays a dividend of $2 per share, D0 = 2. It is estimated that
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A company currently pays a dividend of $2 per share, D0 = 2. It is estimated that the company’s dividend will grow at a rate of 20 percent per year for the next 2 years, then the dividend will grow at a constant rate of 7 percent thereafter. The company’s stock has a beta equal to 1.2, the risk-free rate is 7.5 percent, and the market risk premium is 4 percent. What would you estimate is the stock’s current price?
DividendA 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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Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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