What do you estimate the firm current stock price to be

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1. Summit Systems will pay a dividend of $1.51 this year. If you expect Summit's dividend to grow by 6.5% per year, what is its price per share if the firm's equity cost of capital is 10.4%.

The price per share is...... $. (Round to the nearest cent.)

2. Laurel Enterprises expects earnings next year of $4.15 per share and has a 30% retention rate, which it plans to keep constant. Its equity cost of capital is 9%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 2.7% per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be?

The current stock price will be ......$ (Round to the nearest cent.)

Reference no: EM131880654

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