The company Haytech, Inc. is a 100% equity financed firm. The stock is currently valued at $25 per share, with analysts expecting earnings of $2.25 per share for the next year. Assume that: (a) the required rate of return on equity (discount rate) for Haytech is 13.50%, (b) the company has 150 million shares outstanding, and (c) the company’s payout ratio will remain constant at 50%.
a. What is the market capitalization of Haytech, Inc's equity today?
b. What dividend per share do investors expect next year?