Answer to Question #278540 in Economics for BENSON

Question

Tom, jack and harry ltd paid a dividend of 120 cents. The dividends are expected to grow by 40% per annum during the 3 year supernormal growth period when the cost of equity is 30%, then grow at 20% per annum thereafter when the cost of equity is 25%.

(a) Calculate the value of shares of tom, jack and harry.

(b) if dividends are not expected to grow after the supernormal growth period, what will be the value of the stock of tom, jack and harry ltd

Answer 1

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