Suppose that the expected dividends to be paid one year from now by a broad market index
Question:
Suppose that the expected dividends to be paid one year from now by a broad market index equals $463 million. The appropriate discount rate for the market is 12% per annum with participants believing that dividends paid out by the market will grow by 5.9% per annum in perpetuity. Using the constant-growth formula for valuation, if the market's required return changes to12.1%,by what percentage will the value of the market change?
Give your answer to the nearest decimal. For example, if you think the market value increases by 33.33%, then you would enter "33.3" (without the quotation marks). Or if you thought the market value would decrease by 66.75%, then you would enter "-66.8" (without the quotation marks again. However,the negative sign must be included for adecrease). Do not round off the intermediate steps of your working out. Only round your final answer.