Company Z's earnings and dividends per share are expected to grow indefinitely by 3% a year. Assume next year's dividend per share is $12 and next year's EPS is $6. The market capitalization rate is 9%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $6 a share. Question: How much is the market actually paying per share for growth opportunities?
Company Z's earnings and dividends per share are expected to grow indefinitely by 3% a year. Assume next year's dividend per share is $12 and next year's EPS is $6. The market capitalization rate is 9%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $6 a share. Question: How much is the market actually paying per share for growth opportunities?
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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Company Z's earnings and dividends per share are expected to grow indefinitely by 3% a year. Assume next year's dividend per share is $12 and next year's EPS is $6. The market capitalization rate is 9%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $6 a share.
Question: How much is the market actually paying per share for growth opportunities?
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