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⋅ Assume there are three companies that in the past year paid exactly the same annual dividend of $2.34 a share. In addition, the future annual rate of growth in dividends for each of the three companies has been estimated as follows: Assume also that as the result of a strange set of circumstances, these three companies all have the same required rate of return (r=11%). a. Use the appropriate DVM to value each of these companies. b. Comment briefly on the comparative values of these three companies. What is the major cause of the differences among these three valuations? a. For Buggies-Are-Us, the value of the company's common shares is $ (Round to the nearest cent.). Data table Steady Freddie, Inc (i.e., dividends are expected to remain at $2.34/share) g = 5% (for the foreseeable (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Buggies-Are-Us g=0 Gang Buster Group Year 1 $2.69 Year 2 $3.09 Year 3 $3.54 future) Year 4 $4.09 Year 5 $4.70 Year 6 and beyond: g = 5% Print Done - - X

⋅ Assume there are three companies that in the past year paid exactly the same annual dividend of $2.34 a share. In addition, the future annual rate of growth in dividends for each of the three companies has been estimated as follows: Assume also that as the result of a strange set of circumstances, these three companies all have the same required rate of return (r=11%). a. Use the appropriate DVM to value each of these companies. b. Comment briefly on the comparative values of these three companies. What is the major cause of the differences among these three valuations? a. For Buggies-Are-Us, the value of the company's common shares is $ (Round to the nearest cent.). Data table Steady Freddie, Inc (i.e., dividends are expected to remain at $2.34/share) g = 5% (for the foreseeable (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Buggies-Are-Us g=0 Gang Buster Group Year 1 $2.69 Year 2 $3.09 Year 3 $3.54 future) Year 4 $4.09 Year 5 $4.70 Year 6 and beyond: g = 5% Print Done - - X

Essentials Of Investments
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 there are three companies that in the past year paid exactly the same annual dividend of $2.34 a share. In addition, the future annual rate of growth in dividends for each of the three companies has been estimated as follows: Assume also that as the result of a strange set of circumstances, these three companies all have the same required rate of return (r=11%). a. Use the appropriate DVM to value each of these companies. b. Comment briefly on the comparative values of these three companies. What is the major cause of the differences among these three valuations? a. For Buggies-Are-Us, the value of the company's common shares is $ (Round to the nearest cent.). Data table Steady Freddie, Inc (i.e., dividends are expected to remain at $2.34/share) g = 5% (for the foreseeable (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Buggies-Are-Us g=0 Gang Buster Group Year 1 $2.69 Year 2 $3.09 Year 3 $3.54 future) Year 4 $4.09 Year 5 $4.70 Year 6 and beyond: g = 5% Print Done - - X
Transcribed Image Text:⋅ Assume there are three companies that in the past year paid exactly the same annual dividend of $2.34 a share. In addition, the future annual rate of growth in dividends for each of the three companies has been estimated as follows: Assume also that as the result of a strange set of circumstances, these three companies all have the same required rate of return (r=11%). a. Use the appropriate DVM to value each of these companies. b. Comment briefly on the comparative values of these three companies. What is the major cause of the differences among these three valuations? a. For Buggies-Are-Us, the value of the company's common shares is $ (Round to the nearest cent.). Data table Steady Freddie, Inc (i.e., dividends are expected to remain at $2.34/share) g = 5% (for the foreseeable (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Buggies-Are-Us g=0 Gang Buster Group Year 1 $2.69 Year 2 $3.09 Year 3 $3.54 future) Year 4 $4.09 Year 5 $4.70 Year 6 and beyond: g = 5% Print Done - - X
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