The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Current stock price b. Value of ROE c. Amount % per share
The Fl Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Current stock price b. Value of ROE c. Amount % per share
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 6P
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