IoT Inc., is in the business of measuring Southwest Water’s water demand in Exeter. At the end of the year IoT is expected to pay a $4 dividend per share. It reinvests 40% of its earnings and is growing at 4% a year. a. Assume that IoT continues on this growth trend. What is the expected longrun rate of return from purchasing the stock at $100? b. What part of the price of $100 is attributable to the present value of growth opportunities? Briefly explain your calculations.

IoT Inc., is in the business of measuring Southwest Water’s water demand in Exeter. At the end of the year IoT is expected to pay a $4 dividend per share. It reinvests 40% of its earnings and is growing at 4% a year. a. Assume that IoT continues on this growth trend. What is the expected longrun rate of return from purchasing the stock at $100? b. What part of the price of $100 is attributable to the present value of growth opportunities? Briefly explain your calculations.

Name: IoT Inc., is in the business of measuring Southwest Water’s water dema
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Description: IoT Inc., is in the business of measuring Southwest Water’s water demand in Exeter. At the end of the year IoT is expected to pay a $4 dividend per share. It reinvests 40% of its earnings and is growing at 4% a year.a. Assume that IoT continues on th

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 24P

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