Seattle Software Inc. recently paid an annual dividend of $1.95 per share and is expected to grow
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Seattle Software Inc. recently paid an annual dividend of $1.95 per share and is expected to grow at a 15% rate indefinitely. Short-term federal government securities are paying 4%, while an average stock is earning its owner 11%. Seattle is a very volatile stock, responding to the economic climate two and a half times as violently as an average stock. This is, however, typical of the software industry.
a. How much should a share of Seattle be worth?
b. Do you see any problems with this estimate? Change one assumption to something more reasonable and compare the results.
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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