As a financial analyst working for CSFB your job is to evaluate the equity value...
70.2K
Verified Solution
Link Copied!
Question
Finance
As a financial analyst working for CSFB your job is to evaluate the equity value of the WIFI Inc. Your research identified the following information about that firm: it would pay an annual dividend of $1.20 per share next year (in 2022) and the required rate of return on capital is 20%.
Suppose that dividends are expected to stay constant forever. What is the maximum amount you would pay today (in 2021) for WIFI Inc? (5 pts)
For parts b, c and d assume that dividends grow at a constant 3% rate a year forever.
What is the maximum amount you would pay today (in 2021) for WIFI Incs share of stock? (5 pts)
What is the capital gains yield for WIFI Inc.? (5 pts)
What is the dividend yield for WIFI Inc.? (4 pts)
For part e assume that the dividends will be as follows $1.20 in 2022, $1.40 in 2023 and $1.60 in 2024. After that, dividends are projected to increase at a constant rate of 2% per year forever.
How much are you willing to pay today (in 2021) to buy one share of this stock? (5 pts)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
