Question

Captured Photographs​ doesn't currently pay any dividends but is expected to start doing so in 4 years. That​ is, Captured Photographs will go 3 more years without paying any dividends and then is expected to pay its first dividend​ (of

​$3.07

per​ share) in the fourth year. Once the company starts paying​ dividends, it's expected to continue to do so. The company is expected to have a dividend payout ratio of

37​%

and to maintain a return on equity of

23​%.

Based on the​ DVM, and given a required rate of return of

17​%,

what is the maximum price you should be willing to pay for this stock​ today?

The maximum price you should be willing to pay for this stock today is

​$nothing

Answer 1

PLEASE DON’T FORGET TO GIVE A THUMBS UP ??!!!

UAE Kiven, Dividend layout Ratio = 37% or 0.37 Return on Equity = 23% We know, Dividend layout ratio + Retention Ratio = 0.37 + Retention natio = 1 & Retention Ratio = 0.63 Wow, Retention Ratio growth rate Lgl = Return on Equityx 23 X0.63 g 14.49% or 0.1449 Wowi hiver Dividend in year 4 = $3.07 Da] Dividend in your 5= 3.07(179) = 3.07 C I+0.1449) = 3.51 CDS Required rate = 17% or 0.17 [ro] growth rate = 14.494. u 0-1449 [9] Curent luce = (Bu xitosa) + Genting yahoo 3.07X 3.51 I (1 +0.17) 4 (0.17 -0.1449) (140.1774 = (3.07X0.534) + (139.84 x 0.334) 1.639 + 74.675 - Mammum Price = $$ 76.31 per share