Determine the current price of shares, Cost Accounting

Assignment Help:

2. Blue-Jay Sporting Goods is a start-up company that expects to earn $3.00 per share next year. Since the firm currently retains 100 percent of earnings to finance future growth, no dividends will be paid on the stock during the next three years. Exactly four years from today, the firm expects to pay a dividend of $5.60 per share from earnings of $8.00 per share.

From date four on, Blue-Jay expects to reinvest retained earnings at an ROA of 15 percent. The required rate of return on the company's stock is 12.5 percent. Assuming that Blue-Jay will retain the same fraction of earnings and reinvest at the same ROA from year four on,

a. determine the current price of shares in Blue-Jay and

b. explain whether and why the price earnings ratio for Blue-Jay will increase or decrease over the next four years.


Related Discussions:- Determine the current price of shares

Sanford charge to expense during 2013, In January, 2008, Sanford Corporatio...

In January, 2008, Sanford Corporation purchased a patent for a new product for $1,200,000. The patent was valid for fifteen years but it was estimated to have a useful life of ten

Determine difference between results using marginal costing, Determine Diff...

Determine Difference between Results Using Marginal Costing and Absorption Costing The overhead absorption rate for product X is Ksh.10 per machine hour. All unit of product X

Operating cost, 1.Assume that Abel business corporation is purchasing new e...

1.Assume that Abel business corporation is purchasing new equipment, for 350,000$ at the beginning of 2014. Assume that Abel business corporation is in the 30% corporate tax bracke

Labour cost, labour cost related case study with solution

labour cost related case study with solution

Working capital accounts, Determine the additional cash a company could obt...

Determine the additional cash a company could obtain from its working capital accounts if it can improve its average collection period by three days and inventory turnover by 0.5 t

Determine cost per unit using marginal & absorption costing, Determine Cost...

Determine Cost per Unit By Using Marginal and Absorption Costing The given information was extracted from the book of a company for the year ended on date 31/12/2001. Outpu

Assume a base cost for a conference room, A local hotel offers lodging serv...

A local hotel offers lodging services.  You can pick a name for the hotel(Home Sweet Home Hotel). Your team will develop a prototype reservation system to record client bookings fo

Journal entry to record this transaction, XYZ Corporation recieves $100,000...

XYZ Corporation recieves $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a a debit to investment b

Write Your Message!

Captcha
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