Analysts now expect that dividends will grow annually by 3


1. A firm pays dividends of $5 million once annually. Analysts expect the dividends to remain at this amount indefinitely. The cost of equity is 14%.

a. Calculate the value of the firm.

b. Analysts now expect that dividends will grow annually by 3%. Calculate the firm value.


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Finance Basics: Analysts now expect that dividends will grow annually by 3
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