Determine the current price of shares, Cost Accounting

2. Blue-Jay Sporting Goods is a start-up company that expects to earn $3.00 per share next year. Since the firm currently retains 100 percent of earnings to finance future growth, no dividends will be paid on the stock during the next three years. Exactly four years from today, the firm expects to pay a dividend of $5.60 per share from earnings of $8.00 per share.

From date four on, Blue-Jay expects to reinvest retained earnings at an ROA of 15 percent. The required rate of return on the company's stock is 12.5 percent. Assuming that Blue-Jay will retain the same fraction of earnings and reinvest at the same ROA from year four on,

a. determine the current price of shares in Blue-Jay and

b. explain whether and why the price earnings ratio for Blue-Jay will increase or decrease over the next four years.

Posted Date: 2/23/2013 12:43:10 AM | Location : United States







Related Discussions:- Determine the current price of shares, Assignment Help, Ask Question on Determine the current price of shares, Get Answer, Expert's Help, Determine the current price of shares Discussions

Write discussion on Determine the current price of shares
Your posts are moderated
Related Questions
The use of standard costs can present a number of potential problems or disadvantages. Most of these problems result from improper use of standard costs and the management by excep

Marginal analysis finds to equalize the cost of producing one more item (marginal costs) with the revenue gained from selling one more item (marginal revenue).

LIMITATIONS OF COST ACCOUNTING Cost Accounting similar to additional branches of accountancy is not an precise science although is an art which was developed throughout theorie

i want to know the different types of costs.

allocate the overheads to the three departments and do the secondary allocation of service departments

Making Variance Analysis More Meaningful To compose variance analysis as useful aid to management is the main objective of variance calculations.  However this can only be don

A company is evaluating the following lease or buy option. A four year lease with annual payments of $25,000 payable at the beginning of the year.The tax shield is available at

A. Material Sampling -Analyzing Direct Material Costs You are reviewing a cost proposal, which includes an $800,200 direct material estimate. After Initial examination of the pro

The sales revenue line demonstrates the amount of sales earned throughout the different level of activities. It can be observed that between zero and somewhere between activity B a

Relationship between Cost Accounting and Business Enterprise Cost accounting, like will be mentioned later to adopts a cost center approach to accounting for costs. A cost cen