Problem 9.10 Sandhill Corp. paid a dividend of $2.24 yesterday. The company's dividend is expected to...

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Problem 9.10 Sandhill Corp. paid a dividend of $2.24 yesterday. The companys dividend is expected to grow at a steady rate o

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Answer 1

Answer #1

K_{E =} D₁/P₀+G

K_{E = COST OF EQUITY}

D_{1= DIVIDEND}

P_{0= MARKET PRICE}

17%= 2.24/P₀+5%

2.24/P₀ =12%

P₀= 2.24/12%

P₀ =$18.67

MARKET PRICE = $18.67

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Answer 2

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