Firm announced that dividends will stop for the next 3 years. It announces that dividend will be
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Question:
Firm announced that dividends will stop for the next 3 years. It announces that dividend will be paid at the end of Year 4 at $2 per share, with the dividend growing at a constant rate of 1% each year perpetually.
With that announcement, the firm's shares traded at $5 per share. Analysts estimate the firm's cost of equity to be 15%.
Required:
Compute the value today of the firm's share based on the dividend discount model.
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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