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Company B will pay a dividend of $3 Billion at the end of year 1 and a dividend of $4 Billion at the end of year 2. After year 2, the dividend will increase at a rate of 1% indefinitely. Assume a cost of equity of 10%. What is the value of Company B? $48 Billion $57 Billion

Company B will pay a dividend of $3 Billion at the end of year 1 and a dividend of $4 Billion at the end of year 2. After year 2, the dividend will increase at a rate of 1% indefinitely. Assume a cost of equity of 10%. What is the value of Company B? $48 Billion $57 Billion

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Company B will pay a dividend of $3 Billion at the end of year 1 and a dividend of $4 Billion at the end of year 2. After year 2, the dividend will increase at a rate of 1% indefinitely. Assume a cost of equity of 10%. What is the value of Company B? $48 Billion $57 Billion $52 Billion $43 Billion
Transcribed Image Text:Company B will pay a dividend of $3 Billion at the end of year 1 and a dividend of $4 Billion at the end of year 2. After year 2, the dividend will increase at a rate of 1% indefinitely. Assume a cost of equity of 10%. What is the value of Company B? $48 Billion $57 Billion $52 Billion $43 Billion
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