question archive Chittenden Enterprises has 634 million shares outstanding
Chittenden Enterprises has 634 million shares outstanding
Subject:FinancePrice:2.84 Bought7
Chittenden Enterprises has 634 million shares outstanding. It expects earnings at the end of the year to be $960 million. The firm's equity cost of capital is 9%. Chittenden pays out 30% of its earnings in total: 20% paid out as dividends and 10% used to repurchase shares. If Chittenden's earnings are expected to grow at a constant 3% per year, what is Chittenden's share price?
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| Chittenden enterprises' share price will be $7.57 |
Step-by-step explanation
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Chittenden Enterprises has 634 million outstanding shares. The expected earnings at the end of the year are $960 million. The equity cost of capital is 9%. The constant growth rate is 3%. Next year's dividend per share = 30%*$960 million/634 million = 30% * 1.514 = $0.454/share
Share Price = Dividend next year /(Cost of Equity -Constant growth rate ) = $0.454/(9% - 3%) = $7.57 |
