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(Relative valuation of common stock). Using P/E ratio approach to valuation calculate the value of a share of stock under the following conditions. .
The investor require rate of return is 14 percent,
the expected level of earnings at the end of this year( E1) is $ 6.
the firm follow a policy of retaining 40 percent of its earnings,
the return on equity ( ROE) is 13 percent and
similar shares of stock sell at multiple of 8.108 times earnings per share
Now show that you get same answer using the discounted dividends model .
a) The stock price using the P/E ratio valuation method is…… ( around to nearest cent)
b) The stock price using the dividends discount model is ……… ( around to nearest cent)
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Will the hypothesis test procedure prove that the containers are filled to an amount different from 30 ounces?
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Assume you are using the dividend growth model to value stocks. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect the:
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A share of stock with a beta of 0.85 now sells for $70. Investors expect the stock to pay a year-end dividend of $2. The Treasury bill rate is 2 percent and the market risk premium is 5 percent. If the stock is perceived to be fairly priced today, wh..
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