Assume Highline Company has just paid an annual dividend of $1.06. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 7.9% per year and its dividend payout ratio remains constant, for what price does the dividend - discount model predict Highline stock should sell?
Assume Highline Company has just paid an annual dividend of $1.06. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 7.9% per year and its dividend payout ratio remains constant, for what price does the dividend - discount model predict Highline stock should sell?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Assume Highline Company has just paid an annual dividend of $1.06. Analysts are predicting an 11.3% per year growth rate in earnings over the next five years. After then, Highline's earnings are expected to grow at the current industry average of 5.4% per year. If Highline's equity cost of capital is 7.9% per year and its dividend payout ratio remains constant, for what price does the dividend - discount model predict Highline stock should sell?
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