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VolCal in at the end of the year is expected to have EPS of $5 the...

VolCal in at the end of the year is expected to have EPS of $5 the firm has a cost of capital of 12% currently pay out of all earnings as a divident using the assumption of perfect capital markets

a. 43.7550
b. 58.8235
c.41.666
d.50.2575
e.40.0000
f.45.4545

Solutions

Expert Solution

Price of the share=D1/r

Where D1= Dividend next year and r= Cost of capital (given as 12%)

Since payout is 100%, D1= Expected EPS (given as $5)

Hence share price= $5/0.12 = $41.666

Answer is choice c given.

jeff jeffy answered 2 years ago
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