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In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.20. The dividends are expected to grow at 15 percent over the next five years. In five years, the estimated payout ratio is 35 percent and the benchmark PE ratio is 22. After five years, the earnings are expected to grow at 7 percent per year. The required return is 11 percent. Required: What are the projected dividends for each of the next five years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g.,32.16).) Dividend Year 1 $ 1.33 Year 2 $ 1.48 Year 3 $ 1.64 Year 4 $ 1.82 Year 5 $ 2.02 What is the EPS in five years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) EPS in 5 years $ 5.77 What is the target stock price in five years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Stock price in 5 years $ 126.94 What is the stock price today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Stock price today $ 82.15
What is in bold were my answers but I got them wrong not sure why?
You are examining balance sheets for 2012 and 2013 and you observe that a company's net fixed assets increased from $45 million to $50 million. The income staement states that depreciation was $2 million. If it's the case that the company purchased a..
Sugar and Spice stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock?
Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $305,000 net cash flow per unit for the next five years. Also, a..
Huntley Hospital must maintain $3.3 million in a debt service reserve fund maintained by the board of trustees. The board members would like to count this balance when determining the amount of cash that they should carry for meeting normal transacti..
Which of the following statements about the future value of a dollar is true?
Fly Away, Inc., has balance sheet equity of $5.3 million. At the same time, the income statement shows net income of $763,200. The company paid dividends of $431,208 and has 120,000 shares of stock outstanding. If the benchmark PE ratio is 17, what i..
You buy a 9-year $1,000 par value 3.70% annual-payment coupon bond priced to yield 5.70%. You do not sell the bond at year-end. If you are in a 15% tax bracket, at year-end you will owe taxes on this investment equal to _______.
You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return rate of 9 percent. If your goal is to create a portfolio with an expected return of 13.30 percent, how..
You decide to take a 30-year mortgage of $ 170,000 offered by Oppenheimer Bank. Instead of making the monthly payment of $ 1,080.08 every month, you can make half the payment every two weeks (so that you will make 52 2 = 26 payments a year). How long..
Viktoria has found out that freight to Zurich from Romania by courier would cost on average RON 150 per carton and that the total time from her placing an order to receiving the goods in Zurich would be two weeks
Assume that you bought 5-ycar,, 15-year, and 25-year bonds, all with a 10 percent coupon rnte and semiannual coupons, at their $1,000 par values. Which bond's value would the most affected if interest rates rose to 13 percent? Which would ho least af..
Berkely Farm’s financing includes $6.1 million of bank loans. Its common equity is shown in Binomial’s Annual Report at $6.78 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $16.9 per share. Ca..
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