Question

Electricity for All (EFA) is preparing for their Initial Public Equity Offering (IPO). Being in a highly regulated industry, and with no plans for expanding, EFA plans to payout all of its earnings as dividends that are expected to the be same. If the expected rate of return on its equity is 13% and a fair IPO price is $145 per share, what is EFA's dividend per share

Answer 1

the dividend per share is $18.85 per share

Step-by-step explanation:

The computation of the dividend per share is shown below:

We now that

price per share = Dividend ÷ (required rate of return - growth rate)

$145 = Dividend ÷ (13% - 0%)

So, the dividend is

= $145 × 13%

= $18.85 per share

Hence, the dividend per share is $18.85 per share