Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue
Question:
Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue to do so
indefinitely. The next dividend is expected to be $5 per share.
a. If the market expects a 10% rate of return on Trend-Line, at what price must it be selling?
b. If Trend-Line’s earnings per share will be $8, what part of Trend-Line’s value is due to assets
in place, and what part to growth opportunities?
Constant growth rate...... 6.00%
Dividend per share....... $5.00
Expected rate of return (a)....10.00%
Earnings per share (b)......$8.00
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
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