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Common Stock Valuation, Pt. I - Discussion

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Dividend discount model -

(Note: This is similar to a former exam question.)

a. Using the dividend discount model, what is the current market value of a stock (i.e., P0) that has a par value of $0.10 per share, a dividend growth rate of 5%, and an expected dividend of $ .80 per share at the end of the year, assuming your required rate of return for the stock is 12.5%? Assume the market is at equilibrium.

b. (Review) The charter authorizes 35 million shares. Treasury stock is 3 million shares, and issued stock is 12 million shares. What is the company's market capitalization, assuming the market is at equilibrium?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92854870

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