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Leona [35]
3 years ago
6

Chittenden Enterprises has 600 million shares outstanding. It expects earnings at the end of the year to be $ 970 million. The​

firm's equity cost of capital is 8​%. Chittenden pays out​ 30% of its earnings in​ total: 20% paid out as dividends and​ 10% used to repurchase shares. If​ Chittenden's earnings are expected to grow at a constant 5​% per​ year, what is​ Chittenden's share​ price?
Business
1 answer:
Vilka [71]3 years ago
3 0

Answer:

Chittenden enterprises' share price will be $16.167.

Explanation:

Chittenden Enterprises has 600 million outstanding shares.

The expected earnings at the end of the year are $970 million.

The equity cost of capital is 8%.

The constant growth rate is 5%.

Next year's dividend per share

=30%*$970 million/600 million

=$291 million/600 million

=$0.485/share

Share Price  

= Dividend next year /(Cost of Equity -Constant growth rate )

=$0.485/(8%- 5%)

=$16.167

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5 0
1 year ago
. If shareholders are granted a preemptive right they will: Select one: a. be able to choose the timing and amount of any future
PtichkaEL [24]

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3 years ago
BREMCO recently paid a $2.80 annual dividend on its common stock. This dividend increases at an average rate of 3.8 percent per
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