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What is value today per share?

What is value today per share?

Essentials Of Investments
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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A firm's board of directors has authorized total dividend distributions of $16 million one year from now and $25 million two years from now. Three years from now, the firm will discontinue paying dividends. Instead, the firm will spend a total of $28 million to repurchase shares. (No new stock issuances are planned.) Beginning in the fourth year, the amount spent on net repurchases is expected to grow at an annual rate of 2% forever. There are 7 million common shares outstanding and the annual equity cost of capital is 8.4 percent. What is value today per share?
Transcribed Image Text:A firm's board of directors has authorized total dividend distributions of $16 million one year from now and $25 million two years from now. Three years from now, the firm will discontinue paying dividends. Instead, the firm will spend a total of $28 million to repurchase shares. (No new stock issuances are planned.) Beginning in the fourth year, the amount spent on net repurchases is expected to grow at an annual rate of 2% forever. There are 7 million common shares outstanding and the annual equity cost of capital is 8.4 percent. What is value today per share?
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