АВС ΧYΖ Discount rate (r) Historical growth rate of dividends 0.015+2*0.085=0.185 0.015+1.5*0.085=0.142 (58/30)^(1/30)-1=0.022 Not available. Cannot compute without dividends Sustainable growth rate Fundamental value using dividend growth model with =3395 the historical growth rate Fundamental value using the 467*(1+0.185)/(0.185-0.045) dividend growth model with the sustainable growth rate Fundamental value using residual income growth 0.15*(1-0.7)=0.045 467*(1+0.185)/(0.185-0.022) 0.2*(1-0)=0.2 Not available. Cannot compute without dividends Not available. Cannot =3953 compute without dividends 80*(1+0.022)-(550*0.022)/(0. 185-0.022)=427.36 Not available. Cannot compute without dividends model with the historical growth rate Fundamental value using the 80*(1+0.045)-(550*0.045)/(0. 12*(1+0.2)-(100*0.2)/(0.142- residual income growth 185-0.045)=420.35 0.2)=96.5 model with the sustainable growth rate

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter6: Accounting For Financial Management
Section: Chapter Questions
Problem 6MC: Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC)....
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АВС
XYZ
Discount rate (r)
Historical growth rate of
0.015+2*0.085=0.185
0.015+1.5*0.085=0.142
(58/30)^(1/30)-1=0.022
Not available. Cannot
dividends
compute without dividends
Sustainable growth rate
Fundamental value using
dividend growth model with
the historical growth rate
Fundamental value using the 467*(1+0.185)/(0.185-0.045)
dividend growth model with =3953
the sustainable growth rate
Fundamental value using
residual income growth
0.15*(1-0.7)=0.045
467*(1+0.185)/(0.185-0.022)
0.2*(1-0)=0.2
Not available. Cannot
=3395
compute without dividends
Not available. Cannot
compute without dividends
80*(1+0.022)-(550*0.022)/(0.
185-0.022)=427.36
Not available. Cannot
compute without dividends
model with the historical
growth rate
Fundamental value using the 80*(1+0.045)-(550*0.045)/(0.
residual income growth
12*(1+0.2)-(100*0.2)/(0.142-
0.2)=96.5
185-0.045)=420.35
model with the sustainable
growth rate
Transcribed Image Text:АВС XYZ Discount rate (r) Historical growth rate of 0.015+2*0.085=0.185 0.015+1.5*0.085=0.142 (58/30)^(1/30)-1=0.022 Not available. Cannot dividends compute without dividends Sustainable growth rate Fundamental value using dividend growth model with the historical growth rate Fundamental value using the 467*(1+0.185)/(0.185-0.045) dividend growth model with =3953 the sustainable growth rate Fundamental value using residual income growth 0.15*(1-0.7)=0.045 467*(1+0.185)/(0.185-0.022) 0.2*(1-0)=0.2 Not available. Cannot =3395 compute without dividends Not available. Cannot compute without dividends 80*(1+0.022)-(550*0.022)/(0. 185-0.022)=427.36 Not available. Cannot compute without dividends model with the historical growth rate Fundamental value using the 80*(1+0.045)-(550*0.045)/(0. residual income growth 12*(1+0.2)-(100*0.2)/(0.142- 0.2)=96.5 185-0.045)=420.35 model with the sustainable growth rate
Suppose ABC has changed its products, and dividends will not grow at the
same rate.
a. Explain which stock valuation model(s) you would choose?
b. Given the current price, should you buy or sell ABC stock?
Recall XYZ is a new company.
a. Explain which stock valuation model(s) you would choose?
b. Given the current price, should you buy or sell XYZ?
Transcribed Image Text:Suppose ABC has changed its products, and dividends will not grow at the same rate. a. Explain which stock valuation model(s) you would choose? b. Given the current price, should you buy or sell ABC stock? Recall XYZ is a new company. a. Explain which stock valuation model(s) you would choose? b. Given the current price, should you buy or sell XYZ?
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