Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Consider company ABC. Today it is 1st of January 2023 and ABC has just paid a dividend of £3
million. The expected earnings of ABC for the next 30 years are
per annum. From 1st of January 2053 and onwards the earnings of ABC are expected to grow at a
rate of 5%. The required
The current dividend policy of ABC is such that they pay out 50% of its earnings as dividends
(assume that they pay their dividends on 1st of January every year).
a) Suppose that the dividend payout ratio is expected to stay constant in the future. What is the
value of ABC stock? Show and explain your calculations and any assumptions you make.
b) Just after the dividend payment on 1st of January 2043, ABC is planning to reduce their
dividends and only pay out 40% of its earnings. What is the value of ABC under the new
dividend policy?
c) Provide a recommendation to the management of ABC as to whether they should
increase/cut back on dividends in the future. Can the dividend policy of ABC (in part b)) be
improved on? Motivate your answer
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hey you didnt go up to 2053 only 2040 so the answers are wrong
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is there a way to do this question with formulas and a calculator instead of excel? if so please upload the solution this way
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hey you didnt go up to 2053 only 2040 so the answers are wrong
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by Bartleby Expert
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is there a way to do this question with formulas and a calculator instead of excel? if so please upload the solution this way
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