Question: The Buccaneer Corporation has announced a dividend to be paid this year of $2.00 per share (D1 = $2.00) On the basis of review of similar-risk opportunities, they must earn at least an 18% rate of return on all investments.
a. What is the firm's value if cash flows are expected to have a zero growth rate from now to infinity?
b. What is the firm's value if cash flows grow at a constant rate of 7% from now to infinity?