Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental...
Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 9% per year. If D0 = $2 and rs = 10%, what is the estimated value of Brushy Mountain's stock? Round your answer to the nearest cent.
Homework Answers
Current price=D1/(Required return-Growth rate)
=(2*(1-0.09))/(0.1-(0.09)
=1.82/0.19
=$9.58(Approx).
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