CAS Exam 7 Spring 2014, Question 16
Study guide: Exam 7
Given the following information for a publicly traded corporation:
- Market risk premium: 6.0%
- Return on 90-day T-Bills: 2.5%
- Beta for this corporation: 1.25
The corporation's dividend payments have been projected as follows:
| Calendar Year | Dividend Payment |
|---|---|
| 2014 | $450,000 |
| 2015 | 500,000 |
| 2016 | 675,000 |
After 2016, the corporation's dividend payments are expected to grow at 5% a year.
Estimate the value of this corporation as of December 31, 2013, using the dividend discount model.
Part a (2 points)
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution