(SOLVED) Earnings per common share of ABC Industries for the current


Question Description:

$19

Earnings per common share of ABC Industries for the current year are expected to be $3 and to grow 10% per year over the next 4 years. At the end of the 5 years, earnings growth rate is expected to fall to 5% and continue at that rate for the foreseeable future. ABC’s dividend payout ratio is 40%. If the expected return on ABC’s common shares is 15%, calculate the current share price.

Answer

$19