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Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected growth rate of 12% per year for the next 5 years. After the fifth year, all earnings will be paid out as dividends. The required rate of return on MC, Co equity is 8%. (Solve part b) a. Given that the last dividend paid was $0.5 and the current market price of the stock is $15, what growth rate does the market expect for MC, Co? b. At what price would the analysts value the stock under their own expectations?

Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected growth rate of 12% per year for the next 5 years. After the fifth year, all earnings will be paid out as dividends. The required rate of return on MC, Co equity is 8%. (Solve part b) a. Given that the last dividend paid was $0.5 and the current market price of the stock is $15, what growth rate does the market expect for MC, Co? b. At what price would the analysts value the stock under their own expectations?

Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 24P: Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12%...
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Analysts expect MC, Co. to maintain a dividend payout ratio of 35% and enjoy an expected growth rate of 12% per year for the next 5 years. After the fifth year, all earnings will be paid out as dividends. The required rate of return on MC, Co equity is 8%. (Solve part b)

a. Given that the last dividend paid was $0.5 and the current market price of the stock is $15, what growth rate does the market expect for MC, Co?

b. At what price would the analysts value the stock under their own expectations? 

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