Sales and earnings for emovies are expected to grow rapidly

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Reference no: EM13809775

Sales and earnings for eMovies are expected to grow rapidly over the next 5 years. Although the firm is currently losing money, eMovies expects to begin paying out 60% of earnings during the fiscal year ending in June of 20/20, with initial shareholder dividend of $4.20 per share to be paid in June 2020 (at date 5). From date 5 on, eMovies will continue to retain the same constant fraction of earnings, which the firm expects to reinvest at a constant rate of return equity of 12.5 percent. Assuming eMovies stock has a required return rate of 9%, determine the current market price for the eMovies’ stock.

Reference no: EM13809775

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