Question

This is a successful tech company. You have estimated the C of E to be 11%...

  • This is a successful tech company. You have estimated the C of E to be 11% and expect share buybacks and dividends to grow 8%/year, and you believe the company could be sold for $2.4 billion at the end of Year 4
    • Fill in Years 2 and 3 of the timeline below and calculate the company’s current market cap and share price given 100 million shares outstanding

Timeline ($ in Millions)

            Year                0          1          2          3          4

            Dividends                    45

            Buybacks                     55

            Div+Buybacks               100

            Mkt Cap                                                                      2,400

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