   Chapter 9, Problem 2P Fundamentals of Financial Manageme...

8th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285065137

Solutions

Chapter
Section Fundamentals of Financial Manageme...

8th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285065137
Textbook Problem

CONSTANT GROWTH VALUATION Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year (that is, D1.=$0.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs is 15%. What is the stock's current value per share?

Summary Introduction

To compute: The current value per share for Company T’s stock.

Dividends per Share:

The periodic rewards received by the stockholders for their investment in a company are known as dividends. It is also measure on the basis of per share. Per share calculation of dividends is called dividends per share.

Explanation

Given,

Dividend at year 1 is $0.50. Growth rate is 7%. Required rate of return is 15%. Formula to compute current value per share, Value per Share=Dividend at Year1Required Rate of ReturnGrowth Rate Substitute$0

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