Trend-Line Incorporated has been growing at a rate of 7% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $6 per share. If the market expects a 12% rate of return on Trend-Line, at what price must it be selling? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to assets in place? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to growth opportunities?

Trend-Line Incorporated has been growing at a rate of 7% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $6 per share. If the market expects a 12% rate of return on Trend-Line, at what price must it be selling? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to assets in place? If Trend-Line’s earnings per share will be $9 next year, what part of its value is due to growth opportunities?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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