Fincorp will pay a year-end dividend of $3.10 per share, which is expected to grow at a rate of 3% for the indefinite future. The discount rate is 13%. a. What is the stock selling for? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price b. If earnings are $3.80 a share, what is the implied value of the firm's growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Implied value
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The formula for this model is: P = D / (r - g) where: P = price of the stock D = dividend per share r = discount rate g = growth rate Substituting the given values into the formula, we get: P = $3.10 / (0.13 - 0.03) = $31.00 Show more…
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