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Yesterday, Hewlett-Packard Co. paid out $0.806B in dividends and repurchased $7.703B worth of ...

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Yesterday, Hewlett-Packard Co. paid out $0.806B in dividends and repurchased $7.703B worth of ...

Yesterday, Hewlett-Packard Co. paid out $0.806B in dividends and repurchased $7.703B worth of shares. HP has 2.45B shares outstanding and pays all of its dividends and makes its repurchases on the last day of each year. Because of the slow-down in the economy, analysts expect that next year HP will payout nothing in order to conserve cash. Two years from now, analysts expect only dividends (no repurchases) in an amount equal to the value of dividends paid out yesterday. Three years from now, analysts expect HP to resume repurchases and pay dividends at yesterday's level. Analysts expect total payouts to grow in subsequent years at a perpetual annual rate of 2.5%. Assume that investors require an 11% rate of return on HP's shares. What is the Total Payout model estimate of the stock price today?

▸ $30.53

▸ $32.68

▸ $33.43

▸ $37.11

▸ $44.69

Textbook

Corporate Finance Online

Edition: 2^nd

Authors: Eakins, McNally

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JulioBof

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McQUEEN! Author

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Thank you, thank you, thank you!

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I appreciate what you did here, answered it right Smiling Face with Open Mouth

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