On January 1, 20X1, International Copy Machines (ICOM), one of the favorites of the stock market, was priced at $300 per share This price was based on an expected dividend at the end of the year of $3 per share and an expected annual growth rate in dividends of 20 percent into the future By January...

On January 1, 20X1, International Copy Machines (ICOM), one of the favorites of the stock market, was

Question:

On January 1, 20X1, International Copy Machines (ICOM), one of the favorites of the stock market, was priced at $300 per share. This price was based on an expected at the end of the year of $3 per share and an expected annual growth rate in dividends of 20 percent into the future. By January 20X2, economic indicators have turned down, and investors have revised their estimate for future growth of ICOM downward to 15 percent. What should be the price of the firm's in January 20X2? Assume the following: a. A constant growth valuation model is a reasonable representation of the way the market values ICOM. b. The firm does not change the risk complexion of its assets nor its financial leverage. c. The expected at the end of 20X2 is $3.45 per share.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... 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...