Suppose that a firmrsquos recent earnings per share and, Ask an Expert

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Suppose that a firm’s recent earnings per share and dividend per share are $2.80 and $1.80, respectively. Both are expected to grow at 8 percent. However, the firm’s current P/E ratio of 27 seems high for this growth rate. The P/E ratio is expected to fall to 23 within five years.

Compute the dividends over the next five years.

Calculate the present value of these cash flows using a 10 percent discount rate.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92320377

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