Calculate the share price for beagle beauties

Reference no: EM132200311

Question - Residual Income Model

Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firm's equity beta is 1.40, the risk-free rate is 3.00 percent, and the market risk premium is 8.0 percent.

Dividends per share	$4.44
Return on equity	17.50%
Book value per share	$18.05

	Earnings	Cash Flow	Sales
2015 value per share	$7.00	$7.60	$26.65
Average price multiple	15.10	10.02	3.16
Forecasted growth rate	13.88%	12.41%	8.54%

The required return is 14.20 percent. Use the clean surplus relationship to calculate the share price for Beagle Beauties with the residual income model.

Reference no: EM132200311

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