Problem:
Risk free rate 5.0%
Market risk premium 6.0%
Beta 0.9
Expected growth 5.0%
dividend $2.00
The year-end dividend will remain at $2.00 a share, but synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the current 5%). There are plans to increase the debt ratio of the new subsidiary - the effects of this would be to raise beta to 1.1. What is the per-share value?