The Fl Corporation's dividends per share are expected to grow indefinitely by 6% per year. a. If this year's year-end dividend is $700 and the market capitalization rate is 8% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $21.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much is the market paying per share for growth opportunities (Le, for an ROE on future investments that exceeds the market capitalization rate)? (Round your answer to 2 decimal places.) per share Amount

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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The Fl Corporation's dividends per share are expected to grow indefinitely by 6% per year.
a. If this year's year-end dividend is $7.00 and the market capitalization rate is 8% per year, what must the current stock price be
according to the DDM?
Current stock pnce
b. If the expected earnings per share are $21.00, what is the implied value of the ROE on future investment opportunities? (Round your
answer to 2 decimal places.)
Value of ROE
c. How much is the market paying per share for growth opportunities (te, for an ROE on future investments that exceeds the market
capitalization rate)? (Round your answer to 2 decimal places.)
Amount
%
per share
Transcribed Image Text:The Fl Corporation's dividends per share are expected to grow indefinitely by 6% per year. a. If this year's year-end dividend is $7.00 and the market capitalization rate is 8% per year, what must the current stock price be according to the DDM? Current stock pnce b. If the expected earnings per share are $21.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much is the market paying per share for growth opportunities (te, for an ROE on future investments that exceeds the market capitalization rate)? (Round your answer to 2 decimal places.) Amount % per share
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