Problem 4-33 DCF valuationPortfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $116 million equityportfolio offering a dividend yield (DIV1/ Po) of 6.6%. Dividends and portfolio value are expected to grow at a constant rate. Yourannual fee for managing this portfolio is 0.66% of portfolio value and is calculated at the end of each year.a. Assuming that you will continue to manage the portfolio from now to eternity, what is the present value of the managementcontract? (Enter your answer in millions rounded to 1 decimal places.)Present valuemilllionb. What would the contract value be if you invested in stocks with a 5.6% yield? (Enter your answer in millions rounded to 2 decimalplaces.)Contract valuemillion

Given information : The value of the contract will be the present value of all the cash flows that…

Answered: Problem 4-33 DCF valuation Portfolio…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 18PC

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