Your firm is getting ready to price their Initial Public Offering of common stock and your job is to estimate the offer price
For the next 2 years you will pay dividends of $2 per share at the end of year one and $2.40 at the end of year 2. After year 2.
dividends will still be paid but the growth rate will settle down to 5% per year.
The required return on equity is 9%. Opening a gold mine costs $800,000. In one year we make $500,000, the year after that we make a million dollars and in year
three we have to shut down the mine and pay land reclamation costs of half a million dollars. If we undertake this investment,
what is our rate of return?
Answer rating: 100% (QA)
To estimate the offer price correctly for the Initial Public Offering IPO of common stock you can usView the full answer