Cosmo Company Is Expected to Pay a $0

question 36

Essay

Cosmo Company is expected to pay a $0.50 per share dividend at the end of the year. The dividend is expected to grow at a constant rate of 7 percent per year. The required rate of return on the stock is 15 percent.
Required:
What is the value per share of the company's stock?

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Definitions:

Net Income

The ultimate earnings of an enterprise once it has accounted for all expenditures and taxes against its total sales.

Liquidating Partnership

The process of dissolving a partnership by selling off assets, paying off liabilities, and distributing the remaining assets to partners.

Capital Accounts

Accounts that reflect the initial and subsequent contributions of owners or partners, along with their share of the net income or loss over time.

Final Distribution

The process of allocating the remaining assets of a company, estate, or trust to the rightful beneficiaries or owners after all obligations have been met.