Firms recent earnings per share and dividend per share

Assignment Help Financial Management
Reference no: EM131300287

Suppose that a firm’s recent earnings per share and dividend per share are $2.65 and $1.60, respectively. Both are expected to grow at 8 percent. However, the firm’s current P/E ratio of 17 seems high for this growth rate. The P/E ratio is expected to fall to 13 within five years. . Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Reference no: EM131300287

Questions Cloud

Share price using the constant growth model : Over the past 16 years, Walmart's dividends have grown from $0.27/yr to $1.99/yr. Assuming the same growth rate and a market discount rate of 16%, compute the present value of Walmart's share price using the constant growth model.
What is the principle remaining on the loan : Suppose you take out a loan for $24,475 to purchase a 2016 Nissan Altima. Nissan offers $500 cash back (which you use as part of the down payment), and you also put $2,299 of your own money down (so a total down payment of $2,799).  After three years..
Information technology in health care and public health : Why has implementation of information technology in health care and public health been so slow in comparison to other industries? Discuss the relative importance of factors such as ?nancial incentives or disincentives, organizational culture, complex..
What is the cost of debt-beforetax : Suppose McDonald’s has a bond issue outstanding that matures in 25 years. The bond pays interest semi-annually. The bond is currently selling for $908.72 per $1000 bond. McDonald’s average tax rate is 30% and marginal tax rate is 36%. (use annual com..
Firms recent earnings per share and dividend per share : Suppose that a firm’s recent earnings per share and dividend per share are $2.65 and $1.60, respectively. Both are expected to grow at 8 percent. However, the firm’s current P/E ratio of 17 seems high for this growth rate. The P/E ratio is expected t..
When your fourth projected bonus rolls around : How much money will you have when you can withdraw it on your 16th birthday, if an investment was made on your behalf equal to 11x your age from your 10th to your 14th birthdays with 17% interest? how much will you have when your fourth projected bon..
Find the present value of a cash stream : Find the Present Value of a 1 year annuity due of $484 per month if the interest rate is 1.99% compounded monthly. Find the Present Value of a cash stream that is $1000 at the end of the 1st quarter but is reduced by 50% each subsequent quarter for 1..
Relative purchasing power parity states : Relative purchasing power parity states that nominal exchange rate fluctuations are due to: explain?
Is the investment value to the company worth : You are in charge of procuring a machine for your factory. The process will take about a year to complete and is a major investment in specialized equipment that will make or break the profitability of the company. Which of these machines should the ..

Reviews

Write a Review

Financial Management Questions & Answers

  What are the disadvantages of issuing preferred stock

Preferred stock is not a common source of financing for most firms. However, it should be ignored as a potential source of capital. What is preferred stock and why is it beneficial to corporations? What are the disadvantages of issuing preferred stoc..

  Develop a financial analysis

Develop a financial analysis

  Analyzing the after-tax cost of debt for firm

You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 10.60 percent semi-annual coupon bonds are selling at a price of $1,034.33. These bonds are the only debt outstanding for the firm. What is the after-..

  The expected return on the portfolio

You own a portfolio that has $3,800 invested in Stock A and $4,800 invested in Stock B. If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return on the portfolio?

  Find the cost of capital and value for each firm

Find the cost of capital and value for each firm. -Evaluate the following four projects to determine their acceptance (or rejection) by firms B and C.

  How are financial intermediaries able to generate profits

What are recent challenges that financial institutions have faced given current economic conditions? Have they faced challenges? Has the financial system faced challenges? Explain. How are financial intermediaries able to generate profits?

  What about tenfold increase in your money with a growth rate

How long will it take to double your money with an interest rate of 10 percent? 20 percent? 40 percent? What about tenfold increase in your money with a growth rate of 50 percent? On the advice of your broker ten years ago, you invested in a $6 stock..

  What is the net asset value for this mutual fund

The World Income Appreciation Fund has current assets with a market value of $4.8 billion and has 130 million shares outstanding. What is the net asset value (NAV) for this mutual fund? The World Income Appreciation Fund has current assets with a mar..

  What is the value of the companies operations

Grader Construction Company has just hired you as a consultant to value the company for possible sale. Last year they had EBIT of $25 million. The firms tax rate is 35%, Depreciation expense was $5.00 million and expected to remain at 20% of EBIT for..

  What does the ethical principle of sharing benefits mean

What does the ethical principle of “sharing benefits” mean? all participants in the same study should receive an equal share of the benefits or subject payments. all those who belong to the population being studied will share equally from the benefit..

  Mills mining is considering an expansion project

Mills Mining is considering an expansion project. The proposed project has the following features. The project has an initial cost of $607--this is also the amount which can be depreciated using the following depreciation schedule: What are the one-t..

  Increase the market value of a call option

A(n) ____ will increase the market value of a call option.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd