You expect KT industries (KTI) will have earnings per share of $ 6 this year and expect that they will pay out $ 2.25 of these

Question

2 years ago

6

You expect KT industries (KTI) will have earnings per share of $ 6 this year and expect that they will pay out $ 2.25 of these

earnings to shareholders in the form of a dividend. KTI's return on new investments is 13% and their equity cost of capital is 15%. The value of a share of KTI's stock is closest to:

Business

1 answer:

snow_lady [41] · Answer 1 · 2022-07-14T09:02:24+03:00

Answer:

Value of a share = $15

Explanation:

According to the dividend valuation model, the value of a share is the present value of expected dividend discounted at the required rate of return.

This model is expressed in the formula below;

Value of a share = D/Ke

D- dividend payable in year one

Ke- cost of equity

Value of a share = 2.25/0.15

Value of a share = $15

Value of a share = $15

You expect KT industries​ (KTI) will have earnings per share of $ 6 this year and expect that they will pay out $ 2.25 of these

You expect KT industries (KTI) will have earnings per share of $ 6 this year and expect that they will pay out $ 2.25 of these