Question

king owns a large number of public pay phones. as rhe use of payphones decline deamatically, the form has decided to cut dividends every year by 1.5% indefinetely. the mist recent dividend the firmm oaid was $1.75 per share. assuming a required rate if retuen lf 12% what is the value of a share of the firm ?

12.77

12.96

14.58

16.42

Answer 1

Option 1 is right

Share price = Expected dividend/ (Required rate- growth rate)

= 1.75*(1-0.015)/ (12%+1.5%)

=12.77