Using constant growth rate discounted dividend model find

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Reference no: EM132021189

XYZ Ltd has expected earnings per share of $5. It has a history of paying cash dividends of equal to 20% of earnings. The market capitalization rate for XYZ’s stock is 15% per year and the expected ROE on the firm’s future investment is 17% per year. Using constant growth rate discounted dividend model find:

1) the expected growth rate of dividends

2) the model’s estimate of the present value of the stock

3)if the model is right, what is the expected price of a share a year from now?

Reference no: EM132021189

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