You just set up a firm and plan to raise capitals by selling stocks to the public. You consider paying dividends of $2 in the 1^st year and $3 in the 2^nd year. Then the dividend will grow by 2% annually and forever. If your required rate of return is 10%, how much your stock price you are expecting?

There is a private firm with EPS (Earnings per share) of $4. The firm belongs to IT industry. An average PE (Price to EPS) ratio of the industry is 12. The firm considers going public. How much is an expected price of the firm if goes public?

Answer rating: 100% (QA)

Part 1 Your Firms Stock Price Given information Dividend Year 1 2 Div... View the full answer