Implied value of the roe on future investment opportunities

Assignment Help Financial Management
Reference no: EM131524936

The FI Corporation's dividends per share are expected to grow indefinitely by 11% per year.

a. If this year's year-end dividend is $6.60 and the market capitalization rate is 24% per year, what must the current stock price be according to the DDM? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Current stock price $   

b. If the expected earnings per share are $8.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Value of ROE %

c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Amount $  per share

Reference no: EM131524936

Reviews

Write a Review

 

Financial Management Questions & Answers

  How many years will it be until this bond matures

Company X has a 7 percent semiannual coupon bonds that sells for $976, has a face value of $1,000, and has a yield to maturity of 8.079 percent. How many years will it be until this bond matures?

  Compare the three different theories of money demand

Compare and contrast the three different theories of money demand. Compare the pros and cons of independent central bank?

  Calculate the crossover rate

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs and IRRs a..

  With projected annual sales growth

With a projected annual sales growth of 15% projected annual earnings retention of 12%, and a cash cycle of 30 days, is there a need for external financing?

  Dividend discount model-what is the price of the stock

Financial analysts expect Theron Co.'s earnings and dividends to grow at a rate of 16 percent during the next three years, 12 percent in the fourth and fifth years, and at a constant rate of 6 percent thereafter. Theron's dividend which has just has ..

  Average net income to the average investment

The profitability index of an investment project is the ratio of the: net present value of every project cash flow to the initial cost. present value of the Time 1 and subsequent cash flows to the initial cost. internal rate of return to the current ..

  Compute the late filing and late payment penalty

Mr. and Mrs. Pratt failed to apply for an extension of time to file their 2014 Form 1040 and didn't mail the return to the IRS until May 29, 2015. Assuming the Pratt's had no excuse for filing a delinquent return, compute their late filing and late p..

  The contractor submits termination inventory schedule

If a subcontractor accepts an indemnification clause which provides that he is liable to the prime contractor for any reduction in the prime contract price arising out of defective data which he furnishes, the clause should contain provisions which: ..

  Obligation using one-year zero-coupon bond and perpetuity

You will be paying $5,000 a year in tuition expenses at the end of the next 3 years. Bonds currently yield 30%. What is the present value and curation of your tuition obligation? and if you plant to fund your obligation using a one-year zero-coupon b..

  Two announcements concerning its common stock

Angelina's made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $2.20 a share. Secondly, the company announced that all future dividends will increase by 5% annually. Wha..

  About the under-valued or over-valued

Under/Over Valued Stock A manager believes his firm will earn a 16.4 percent return next year. His firm has a beta of 1.54, the expected return on the market is 14.4 percent, and the risk-free rate is 4.4 percent. Compute the return the firm should e..

  Based on any method for assessing risk

A firm is considering the purchase of an asset whose risk is greater than the current risk of the firm, based on any method for assessing risk. In evaluating this asset, the decision maker should. Increase the IRR of the asset to reflect the greater ..

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