Firm A next dividend will be $2.5 per share. The dividend growth rate during year 1...
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Firm A next dividend will be $2.5 per share. The dividend growth rate during year 1 is 24.5%, during year 2 is 20%, during year 3 is 18.5%, and during year 4 is 12%. From year 5 to year 10, the firm is not planning to pay any dividends. From year 11 to year 18, the firm will pay a constant dividend of $1.5 per year per share. Starting from year 19, the firm dividends are expected to grow constantly by 8.5% forever. The required rate of return on the stocks is 10%. a/ Compute the current intrinsic value of the stock. b/ Compte the intrinsic value of the stock at the end of year 3? c/ Compute the intrinsic value of the stock at the end of year 12. Firm A next dividend will be $2.5 per share. The dividend growth rate during year 1 is 24.5%, during year 2 is 20%, during year 3 is 18.5%, and during year 4 is 12%. From year 5 to year 10, the firm is not planning to pay any dividends. From year 11 to year 18, the firm will pay a constant dividend of $1.5 per year per share. Starting from year 19, the firm dividends are expected to grow constantly by 8.5% forever. The required rate of return on the stocks is 10%. a/ Compute the current intrinsic value of the stock. b/ Compte the intrinsic value of the stock at the end of year 3? c/ Compute the intrinsic value of the stock at the end of year 12.
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2 Once we have determined the dividends we need to determine the horizo... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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