Over the next three years, the company Paris is expected to pay dividends as follows: Time...

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Over the next three years, the company Paris is expected to pay dividends as follows: Time 1 2 3 Dividend 15 20 24 Thereafter, Paris dividends are expected to grow at a constant rate of 5% per year. Paris should reinvest 40% of its benefits from T = 2. The expected return regarding Paris stocks is 15%. - Calculate the stock price at the end T = 2. - If Paris keeps 40% of its EPS to reinvest in new projects, what must be the return rate of new investments in order to achieve the dividend growth of 5%? - What is the stock price today? - If Paris changes its dividend distribution policy and decides to distribute all its benefits to its shareholders from T = 3, what would be the impact of this policy on the stock price? Comment on the result. Over the next three years, the company Paris is expected to pay dividends as follows: Time 1 2 3 Dividend 15 20 24 Thereafter, Paris dividends are expected to grow at a constant rate of 5% per year. Paris should reinvest 40% of its benefits from T = 2. The expected return regarding Paris stocks is 15%. - Calculate the stock price at the end T = 2. - If Paris keeps 40% of its EPS to reinvest in new projects, what must be the return rate of new investments in order to achieve the dividend growth of 5%? - What is the stock price today? - If Paris changes its dividend distribution policy and decides to distribute all its benefits to its shareholders from T = 3, what would be the impact of this policy on the stock price? Comment on the result.

Answer rating: 100% (QA)

Calcul ate the stock price at the end T 2 WORK ING P D 1 D 2 D 3 15 20 24 59 P 1 g ... View the full answer