Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Prescott Pharmaceuticals will pay an annual dividend of $0.88 one year from now at t=1. Analysts expect
this dividend to grow at 18.5% per year thereafter until the end of year 21. Dividends are then expected to
be stable until t=31. Afterwards, dividends decline at a rate of 4.4% annually (the dividend at t=32 is 4.4%
smaller than the payment at t=31) and are paid in perpetuity.
a) According to the dividend-discount model, what is the value of a Prescott Pharmaceuticals share if the
firm's cost of equity capital is 15.0%?.
The value of per share is $
(Round your answer to the nearest cent)
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Transcribed Image Text:Prescott Pharmaceuticals will pay an annual dividend of $0.88 one year from now at t=1. Analysts expect this dividend to grow at 18.5% per year thereafter until the end of year 21. Dividends are then expected to be stable until t=31. Afterwards, dividends decline at a rate of 4.4% annually (the dividend at t=32 is 4.4% smaller than the payment at t=31) and are paid in perpetuity. a) According to the dividend-discount model, what is the value of a Prescott Pharmaceuticals share if the firm's cost of equity capital is 15.0%?. The value of per share is $ (Round your answer to the nearest cent)
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