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Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend. The company had a book value (or equity) per share of $20. The market has a risk free rate of 3.1% and market return 11.1%. Abbott has a historical beta of .90.
What’s the company’s ROE?
What’s the sustainable growth rate?
What’s the discount rate using CAPM?
Calculate the stock price for Abbott based on Residual Income Model.
The newspaper reported last week that Bennington Enterprises earned $34.02 million this year. The report also stated that the firm’s return on equity is 14 percent. Bennington retains 70 percent of its earnings. What will next year's earning be?
The cost of debt is lower than the costs of stocks. Cost of Preferred stock is higher than the cost of common stocks.
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