The current (year 0) price of the shares of Company XYZ is $50. There are 1 million shares outstanding. Next year (year 1)’s dividend per share is $2, which represents a 60% payout from earnings (net income). Investors expect a ROE of 20%, and a constant growth.
1. What will be the dividend per share in year 2 and year 3?
2. What is the current market value of the firm?
3. What will be the value of the firm next year after the payout?
Answers: 3
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The current (year 0) price of the shares of Company XYZ is $50. There are 1 million shares outstandi...
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