m Enterprises expects that one year from now it will pay a total dividend of $4.5 million and repurchase $4.5 million worth of shares. It plans to spend $9.0 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends

m Enterprises expects that one year from now it will pay a total dividend of $4.5 million and repurchase $4.5 million worth of shares. It plans to spend $9.0 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Zoom Enterprises expects that one year from now it will pay a total dividend of $4.5 million and repurchase $4.5 million worth of shares. It plans to spend $9.0 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases. If Zoom's equity cost of capital is 13.5% and it has 4.9 million shares outstanding, what is its share price today?

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