How much is market paying per share for growth opportunities

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The FI Corporation's dividends per share are expected to grow indefinitely by 8% per year.

a. If this year's year-end dividend is $11.00 and the market capitalization rate is 15% per year, what must the current stock price be according to the DDM? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Current stock price $_____ ?

b. If the expected earnings per share are $10.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Value of ROE ______% ?

c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Amount $ _____ per share ?

Reference no: EM131520342

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