Price after 3 years is calculated using Dividend Discount Model at $24.86. This amount is further discounted for 3 years at the rate of equity cost of capital and thus price today is ascertained at $19.41
Details of calculation as follows:
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash...
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash needed for investment. Suppose you expected GE to stop paying dividends for two years before resuming an annual dividend of $1.10 per share, paid 2 years from now, growing by 3.2% per year. If GE's equity cost of capital is 8.9%, estimate the value of GE's shares today. The price today is $ . (Round to the nearest cent.)
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash needed for investment. Suppose you expected GE to stop paying dividends for two years before resuming an annual dividend of $1.20 per share, paid 4 years from now, growing by 3.2% per year. If GE's equity cost of capital is 8.7%, estimate the value of GE's shares today. The price today is $ - (Round to the nearest cent.)
In mid-2018, some analysts recommended that General Electric (GE) suspend its dividend payments to preserve cash needed for investment. Suppose you expected GE to stop paying dividends for two years before resuming an annual dividend of $1 per share, paid 3 years from now, growing by 3% per year. If GE's equity cost of capital is 9%, estimate the value of GE's shares today.
Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's future sales, costs and capital requirements, has led to an alternative stock valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash flows: Market value of company FCF (1+WACC) + FCF (1+WACC)...