Penn Electric just developed a revolutionary new type of method used to hydraulically generate electricity which is extremely efficient for use in a certain geographic location. As a result, Penn Electric is expected to experience a 15 percent rate of growth for the next 5 years, after which, growth will slow to 5 percent into the foreseeable future. The market requires a 12 percent return on Penn Electric stock and the most recent dividend paid was $1.75 per share. Calculate the theoretical value of the stock today.

Penn Electric just developed a revolutionary new type of method used to hydraulically generate electricity which is extremely efficient for use in a certain geographic location. As a result, Penn Electric is expected to experience a 15 percent rate of growth for the next 5 years, after which, growth will slow to 5 percent into the foreseeable future. The market requires a 12 percent return on Penn Electric stock and the most recent dividend paid was $1.75 per share. Calculate the theoretical value of the stock today.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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