Price per share of a no growth firm
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Company X is a no growth firm. It is expected to provide a constant earnings per share of $30. If all earnings are paid out as dividends and the required rate of return on equity is 15%, calculate the current price per share for the stock.
a) $45
b) $100
c) $150
d) $200
e) Not enough information to answer the question
f) There is enough information provided but none of the answers above is correct.
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Solution Summary
The solution calculate the price per share of a no growth firm with constant earnings all paid out.
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We know that Net present value of growth opportunities can be calculated as: NPVGO = P1 - EPS / r where P1 is the current share ...
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