Assume MIE is a listed company and pays dividends once each year, and it just distributed this year’s $1.30 dividend per share and expected to grow by 9% for the next year. After the next year, you estimate that MIE will increase its dividends by 7 % per year forever. Required: a) What is the current value of this share if your discount rate is 10%?
Assume MIE is a listed company and pays dividends once each year, and it just distributed this year’s $1.30 dividend per share and expected to grow by 9% for the next year. After the next year, you estimate that MIE will increase its dividends by 7 % per year forever. Required: a) What is the current value of this share if your discount rate is 10%?
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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Question
Assume MIE is a listed company and pays dividends once each year, and it just distributed this year’s $1.30 dividend per share and expected to grow by 9% for the next year. After the next year, you estimate that MIE will increase its dividends by 7 % per year forever.
Required:
a) What is the current value of this share if your discount rate is 10%?
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