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Protected Steel Corporation (PSC) has a book value of $6 per share. PSC is expected to...

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Finance

Protected Steel Corporation (PSC) has a book value of $6 pershare. PSC is expected to earn $0.60 per share forever and pays outall its earnings as dividends. The required rate of return on PSC’sequity is 12 percent. Calculate the value of the stock based on a)dividend discount model and b) residual income model

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a Expected earnings Next year earnings 060 Since PSC pays out all its earnings as dividends Dividend next year D1 Next year earnings 060 As a results of constant earnings per share and 100 payout ratio growth rate of earnings and dividends g 0 Hence Dividend for any year 060 Required rate of return on equity r 12 According dividend discount model Value of stock Present value of    See Answer
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Protected Steel Corporation (PSC) has a book value of $6 pershare. PSC is expected to earn $0.60 per share forever and pays outall its earnings as dividends. The required rate of return on PSC’sequity is 12 percent. Calculate the value of the stock based on a)dividend discount model and b) residual income model

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