Microsoft Corporation reported earnings of $7.34 per share in the most recent 12-month period and has just paid annual dividends per share of $2.24. Earnings are expected to grow at 12% a year for three years, during which period the dividend payout ratio is expected to remain unchanged from its current level. After that period, the earnings growth rate is expected to drop to 6% and the payout ratio is expected to increase to 60% of earnings. The firm has a beta of 0.8 currently, and it is expected to have a beta of 0.7 after it increases its payout ratio. If the term structure of riskfree interest rates is flat at 2.6% and the market risk premium is 8%, what should the price per share of Microsoft be
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Microsoft Corporation reported earnings of $7.34 per share in the most recent 12-month period and ha...
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