TJones Productions has been a growth firm and not been paying dividends in the past. Now they are maturing and growth is moderating which allows them to begin paying dividends.
The analysts forecast that the expected dividends will be: Year 1: 0.95, year 2: 1.66, year 3: 2.17 then are expected to grow at g – 3%. The required rate of return of 8.10% results in an intrinsic value’ (VO) of $38.71. If the current market price (PO) is $36.70, what is the expected rate of return (E(r))? Get Finance homework help today