EBM is expected to pay a GH $21.00 dividend next year. The dividend will decline by 10% annually for the following three years. In year 5, EBM will sell off assets worth GH¢100 per share. The year 5 dividend, which includes a distribution of some of the proceeds of the asset sale, is expected to be GH$60. In year 6, the dividend is expected to decrease to GH$40 and will be maintained at GH$40 for one additional year. The dividend is then expected to grow by 5% annually thereafter. If the required rate of return is 12%, what is the value of one share of EBM?
EBM is expected to pay a GH $21.00 dividend next year. The dividend will decline by 10% annually for the following three years. In year 5, EBM will sell off assets worth GH¢100 per share. The year 5 dividend, which includes a distribution of some of the proceeds of the asset sale, is expected to be GH$60. In year 6, the dividend is expected to decrease to GH$40 and will be maintained at GH$40 for one additional year. The dividend is then expected to grow by 5% annually thereafter. If the required rate of return is 12%, what is the value of one share of EBM?
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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Transcribed Image Text:EBM is expected to pay a GH$21.00 dividend next year. The dividend will decline by 10%
annually for the following three years. In year 5, EBM will sell off assets worth GH$100 per
share. The year 5 dividend, which includes a distribution of some of the proceeds of the
asset sale, is expected to be GH¢60. In year 6, the dividend is expected to decrease to
GH$40 and will be maintained at GH $40 for one additional year. The dividend is then
expected to grow by 5% annually thereafter. If the required rate of return is 12%, what is
the value of one share of EBM?
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