Dixie Mart has 75,000 shares of stock outstanding.The firm expects to earn net income of $268,000 next year with annual increases of 4.5 percent per year thereafter.The firm also expects to pay out 40 percent of its net income in dividends and share repurchases.The required return is 12 percent.What is its share price?

Question

Quizplus · Accepted Answer

Total PV = (.40 × $268,000)/(.12 - .045)= $1,429,333.33Price per share = $1,429,333.33/75,000 = $19.06

Dixie Mart Has 75,000 Shares of Stock Outstanding