- Consider a firm that has EPS of $5 at the end of the first year, a dividend-payout ratio of 30%, a discount rate of 16%, and a return on retained earnings of 20%. - From the dividend growth model, the price of a share is: Div P, = R-g - Under the NPVGO model, what is the value of the firm without any future investments? EPS P R a What is the NPVGO? NPVGO = P =
- Consider a firm that has EPS of $5 at the end of the first year, a dividend-payout ratio of 30%, a discount rate of 16%, and a return on retained earnings of 20%. - From the dividend growth model, the price of a share is: Div P, = R-g - Under the NPVGO model, what is the value of the firm without any future investments? EPS P R a What is the NPVGO? NPVGO = P =
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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M2
Transcribed Image Text:- Consider a firm that has EPS of $5 at the end of the
first year, a dividend-payout ratio of 30%, a discount
rate of 16%, and a return on retained earnings of
20%.
From the dividend growth model, the price of a share is:
Div,
R-g
- Under the NPVGO model, what is the value of the firm
without any future investments?
EPS
P, =
R
. What is the NPVGO?
NPVGO =
P, =
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