Assume that Cola Co. has a share price of $42.88. The firm will pay a dividend of $1.14 in one year, and you expect Cola Co. to raise this dividend by approximately 6.6% per year in perpetuity. a. If Cola Co.'s equity cost of capital is 8.4%, what share price would you expect based on your estimate of the dividend growth rate? b. Given Cola Co.'s share price, what would you conclude about your assessment of Cola Co.'s future dividend growth?

Assume that Cola Co. has a share price of $42.88. The firm will pay a dividend of $1.14 in one year, and you expect Cola Co. to raise this dividend by approximately 6.6% per year in perpetuity. a. If Cola Co.'s equity cost of capital is 8.4%, what share price would you expect based on your estimate of the dividend growth rate? b. Given Cola Co.'s share price, what would you conclude about your assessment of Cola Co.'s future dividend growth?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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