Compute the book value per share and value of share using

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Compute the book value per share and value of share using dividend discount model.

1. Calculate the book value per share based on the reported stockholders' equity account for Bridgford Foods in fiscal year ending November 2, 2005:

Shareholder's equity                        ('000)

Preferred stock, without par value

Authorized-1,000 shares

Issued and outstanding-none

Common stock, $1.00 par value     $10,505

Capital in excess of par value          17,475

Retained earnings                          29,355

Total shareholders' equity              $57,335

2. The Kummins Engine Company common stock has a beta of 0.9. The current risk-free rate of return is 5 percent and the market risk premium is 8 percent. The CEO of the company is quoted in a press release as saying that the firm will pay a dividend of $0.80 / share in the coming year and expects the dividends to grow at a constant rate of 7 percent for the foreseeable future. Using the constant growth model, what value would you assign to this stock?

Reference no: EM13356931

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