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Calculate the Estimated Share Price for the Following Companies Assuming

question 29

Essay

Calculate the estimated share price for the following companies assuming a required return of 12% p.a.(a)Red's dividends have been $1.70 per share for some time.It does not reinvest any of its earnings and therefore is not expected to grow in the foreseeable future.(b)White's most recent dividend was $1.70 per share and dividends are expected to continue to grow at 4% indefinitely.


Definitions:

Government Price Control

Regulatory measures by government entities designed to set or limit the prices of certain goods and services.

Quantity of Sales

The total number of units of a product or service sold within a specific period.

Price Effect

The impact that changing prices have on the demand and supply of goods and services in the market.

Elastic Supply

A situation in which the supply of a product changes significantly when its price changes.

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