Firm B's expected earnings per share next year are $2.30. In the last ten years, its div-idend payout rate was, on average, 70%, and its growth rate of dividends per share was, on average, 3% per year. Its return on new investment is expected to be 8%. Its cost of equity (or equity cost of capital) is 10% and expected to remain at that level. Assume that Firm B is maximizing shareholder value.

What is Firm B's fair price per share?

Answer rating: 100% (QA)

To determine Firm Bs fair price per share we can use the dividend ... View the full answer