The FI Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. $ a. Current stock price b. Value of ROE c. Amount 150.00 18.00 × % 120.00 per share
The FI Corporation's dividends per share are expected to grow indefinitely by 8% per year. Required: a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Note: Round your answer to 2 decimal places. b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. $ a. Current stock price b. Value of ROE c. Amount 150.00 18.00 × % 120.00 per share
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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Answer B and C pls
Transcribed Image Text:The FI Corporation's dividends per share are expected to grow indefinitely by 8% per year.
Required:
a. If this year's year-end dividend is $3.00 and the market capitalization rate is 10% per year, what must the current stock price be
according to the DDM?
Note: Round your answer to 2 decimal places.
b. If the expected earnings per share are $9.00, what is the implied value of the ROE on future investment opportunities?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market
capitalization rate)?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Answer is complete but not entirely correct.
$
a. Current stock price
b. Value of ROE
c. Amount
150.00
18.00 × %
120.00 per share
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