Solution-What is the maximum amount you would pay today

What is the maximum amount you would pay today

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Reference no: EM133136676

Question - As a financial analyst working for CSFB your job is to evaluate the equity value of the WIFI Inc. Your research identified the following information about that firm: it would pay an annual dividend of $1.20 per share next year (in 2022) and the required rate of return on capital is 20%.

(a) Suppose that dividends are expected to stay constant forever. What is the maximum amount you would pay today (in 2021) for WIFI Inc?

For parts b, c and d assume that dividends grow at a constant 3% rate a year forever.

(b) What is the maximum amount you would pay today (in 2021) for WIFI Inc's share of stock?

For part e assume that the dividends will be as follows $1.20 in 2022, $1.40 in 2023 and $1.60 in 2024. After that, dividends are projected to increase at a constant rate of 2% per year forever.

(e) How much are you willing to pay today (in 2021) to buy one share of this stock?

Reference no: EM133136676

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What is the maximum amount you would pay today

Reference no: EM133136676

Reference no: EM133136676

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