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You are an analyst who follows Silicon Valley start up firms. You are attempting to value a new ride sharing firm called Ryde. You notice that Ryde's current earnings per share (e.g., E0) are $5. After examining the firm's financial statements, you expect that the firm has access to investments over the next three years that will provide a return on investment of 21%. Because they are young and growing quickly, you expect Ryde to retain all of their earnings for the next three years. After that, you expect that the return on investment will decrease to 12% and that Ryde will only retain half of their earnings. What is your estimate for the dividend that Ryde will pay in 4 years (e.g., once they begin paying out half of their earnings as dividends)?

Financial Management, Finance

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