Assume that the average firm in your company’s industry is expected to grow at a constant rate of 7% and its dividend yield is 8%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect you to expect that its earnings and dividends will grow at a rate of 40% this year and 20% the following year, after which growth should match the 7% industry average rate. The last dividend paid was $1. What is the current value per share of your firm’s stock?
Assume that the average firm in your company’s industry is expected to grow at a constant rate of 7% and its dividend yield is 8%.
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