Assume there are three companies that in the past year paid exactly the same annual...
60.1K
Verified Solution
Link Copied!
Question
Finance
Assume there are three companies that in the past year paid exactly the same annual dividend of $1.28 a share. In addition, the future annual rate of growth in dividends for each of the three companies has been estimated as follows: SEE TABLE. Assume also that as the result of a strange set of circumstances, these three companies all have the same required rate of return (r=12).
Buggies- Are-Us
Steady Freddie, Inc
Gang Buster Group
g = 0
g = 8%
Year 1
$1.44
(i.e. dividends are expected to remain at $1.28/share
(for the foreseeable future)
2
$1.62
3
$1.82
4
$2.05
Year 5 and beyond: g = 8%
a. Use the appropriate DVM to value each of these companies.
b. Comment briefly on the comparative values of these three companies. What is the major cause of the differences among these three valuations?
For Buggies-Are-Us, the value of the company's common shares is _______ (Round to the nearest cent.)
For Steady Freddie, Inc., the value of the company's common shares is ______(Round to the nearest cent.)
For Gang Buster Group, the value of the company's common shares is _______ (Round to the nearest cent.)
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!
