Estimating the Market’s Expected Growth Rate in Dividends Mattel, Inc. was trading at a price of $31.24 per common share at December 31, 2015. Using the Gordon growth model, estimate the market’s expected growth in dividends that is required to yield the $31.24 price per common share. Assume that the current dividend per share is $1.52 and is expected to grow thereafter, and that the cost of equity capital is 8.0%. (Hint: Use the equation for the dividend discount model with increasing perpetuity, at the top of page 12-20.) Round answer to one decimal place (ex: 0.0235 = 2.4%). Note: Assume current dividend per share is the dividend amount when the constant growth period begins. Answer%
Subject: accounting
Estimating the Market’s Expected Growth Rate in Dividends
Mattel, Inc. was trading at a price of $31.24 per common share at December 31, 2015. Using the
Round answer to one decimal place (ex: 0.0235 = 2.4%).
Note: Assume current dividend per share is the dividend amount when the constant growth period begins.
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