Mastery Corporation expects to pay a level annual dividend of $3 per share on its common stock each year into the indefinite future. The current rate of discount applied to all expected future dividend flows by capital market investors for companies of comparable risk is 12 percent. Estimate the current per-share market price (S) of Mastery's common stock. Suppose the sum of the default-free interest rate and the premium for equity risk declines from 12 percent to 10 percent. How would your estimate of the Mastery Corporation's per-share stock price change? What if the current discount rate on comparable equity shares rises to 15 percent?

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The Answer of Mastery Corporation expects to pay a level annual dividend of $3 per share on its common stock each year into the indefinite future. The current rate of discount applied to all expected future dividend flows by capital market investors for companies of comparable risk is 12 percent. Estimate the current per-share market price (S) of Mastery's common stock. Suppose the sum of the default-free interest rate and the premium for equity risk declines from 12 percent to 10 percent. How would your estimate of the Mastery Corporation's per-share stock price change? What if the current discount rate on comparable equity shares rises to 15 percent?

Mastery Corporation Expects to Pay a Level Annual Dividend of $3