Estimate the value per share-dividend discount model

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Johnson and Johnson reported earnings per share of $6.400 in 2013 and paid dividends per share of $3.40 in that year. The firm reported depreciation of $630 million in 2013 and capital expenditure of $950 million. There were 320 million shares outstanding, trading at $102 per share. The working capital needs are negligible. The firm has debt outstanding of $3.2 billion and intends to maintain its current financing mix of debt and equity to finance future investment needs. The firm is in steady state, and earnings are expected to grow 7% per year. The stock had a beta of 1.50. The Treasury bond rate is 4%. The market rate of return is 8.25%.

Estimate the value per share, using the dividend discount model

Estimate the value per share, using the FCFE model.

Explain the difference in your price

Reference no: EM13945437

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