Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $2 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $4 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 5%. If the firm's investors expect to earn a return of 12% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price
Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $2 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $4 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 5%. If the firm's investors expect to earn a return of 12% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price
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:Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $2 per share
dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2
years. After the third year (in which dividends are $4 per share), dividend growth is expected to settle down to a more moderate long.
term growth rate of 5%. If the firm's Investors expect to earn a return of 12% on this stock, what must be its price?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Current price
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