A firm is scheduled to earn $2.77 per share over the next year. Since the firm...
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A firm is scheduled to earn $2.77 per share over the next year. Since the firm has an ROE of 16%, which is greater than the capitalization rate of 10.86% estimated using CAPM, management has decided to reinvest 37% of the firm's earnings back into the firm in order to generate future growth. Whatever the firm does not reinvest into the business it pays as dividends to shareholders. Calculate the current price per share for the firm. Note: Round your answer to the nearest cent. For example, if the calculated value of the firm is $35.7382, enter it as: 35.74 A firm is scheduled to earn $2.77 per share over the next year. Since the firm has an ROE of 16%, which is greater than the capitalization rate of 10.86% estimated using CAPM, management has decided to reinvest 37% of the firm's earnings back into the firm in order to generate future growth. Whatever the firm does not reinvest into the business it pays as dividends to shareholders. Calculate the current price per share for the firm. Note: Round your answer to the nearest cent. For example, if the calculated value of the firm is $35.7382, enter it as: 35.74
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To calculate the current price per share we need to determine the dividends that the fir... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
Posted Date:
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