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    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 Preview

    We know that Net present value of growth opportunities can be calculated as: NPVGO = P1 - EPS / r where P1 is the current share ...

    Solution Summary

    The solution calculate the price per share of a no growth firm with constant earnings all paid out.