Exercise

Equity Value per Dividend Discount Model

In this exercise, you will use the dividend discount model (DDM) to value the subject firm's equity. Suppose the company pays dividends of $1 per share (div) annually into perpetuity and that the dividends grow each year into perpetuity at a rate of 3.0% (pgr). Assuming the cost of equity is 11.55% (ke), what is the value of the firm's equity per share?

Instructions

100 XP

Calculate the equity value using the DDM.

Take Hint (-30 XP)