Computing the expected dividend of the firm using ebit-eps

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Computing the expected dividend of the firm using EBIT-EPS analysis

Firms C and D have time zero EBIT of $1,000. The required return on equity for both of these unlevered firms is 10%. The marginal corporate tax rate is 34%. Firm C has a dividend payout ratio of 20% and a dividend growth rate of 8%. Firm D has a dividend payout ratio of 80% and a dividend growth rate of 4%.

What is each firm's expected dividend at the end of the next year?

Reference no: EM1317103

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