Question: A company has just completed a year which resulted in $10 earning per share and has just paid 30% of this amount to its shareholders as a dividend. Assume the common stock of similar companies returns 15% to their investors.
If the company expects similar results in the foreseeable future, how much should a share of stock in this firm be worth?
If the company expects to grow by 3% per year in the foreseeable future, how much should a share stock in this firm be worth?
If the company is engaged in a product launch that should allow the company to grow by 10% this year and next year before settling into the aforementioned 3% growth rate thereafter, how much should a share of stock in this firm be worth?