Derry Corporation is expected to have an EBIT of $2,600,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $115,000, and $155,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $13,500,000 in debt and 1,150,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company's WACC is 9.2 percent and the tax rate is 23 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Share price $ 41.86 X

Derry Corporation is expected to have an EBIT of $2,600,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $115,000, and $155,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $13,500,000 in debt and 1,150,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company's WACC is 9.2 percent and the tax rate is 23 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Share price $ 41.86 X

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

HEADLAND Ltd. had earnings per share of $4 as of December 31, 2022, but paid no dividends. Earnings were expected to grow at 16.1 percent per year for the following five years. HEADLAND Ltd. will start paying dividends for the first time on December 31, 2027, distributing 50 percent of its earnings to shareholders. Earnings growth will be 5 percent per year for the next six years (that is, from January 1, 2028, through to December 31, 2033). Starting on December 31, 2033, HEADLAND Ltd. will begin to pay out 80 percent of its earnings in dividends and earnings growth will stabilize at 2 percent per year in perpetuity.The required rate of return on HEADLAND stock is 10 percent. What should be the current share price of HEADLAND? (Round intermediate calculations to 6 decimal places, e.g. 15.612125 and the final answer to 2 decimal places, e.g. 15.61.) Current share price of HEADLAND $
ABC Corporation has P15,000,000 in invested capital. Its weighted average cost of capital is18%. Annual earnings are expected to be at P3,000,000. After operating for 20 years, it will be closed. Based on these information, how much is the firm value after accounting for excess earnings?
i need the answer quickly
Derry Corporation is expected to have an EBIT of $3,400,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $155,000, and $195,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $17,500,000 in debt and 1,350,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company's WACC is 9.1 percent and the tax rate is 21 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
The Link Resport & Spa Company has 75,000 shares of stock outstanding. The company is expected to have total earnings next year of $500,000. The company plans to reinvest $275,000 in projects earning an (equity) return of 15%, and to return the remainder of its earnings to shareholders in the form of dividends or stock repurchases. The first dividend or repurchse payments will be made exactly one year from today. In all future years, the market expects the company's reinvestment rate and the return on reinvested earnings to remain constant. The required return on equity is 12%. What is the value of the firm today, if it 1.) uses the remaining $225,000 to pay dividends, and will continue this payout policy (as a percent of earnings) in future years? 2) uses 40% of its annual payout to repurchase stock, and uses the remainder to pay divdends (and will continue this policy in future years)? Assume that the firm will use the remaining $225,000 to pay dividends (and will continue this…
Steph & Sons has a capital structure that consists of 20 percent equity and 80 percent debt. The company expects to report $3 million in net income this year, and 60 percent of the net income will be paid out as dividends. What is the equity structure of the target capital structure?
Pearl Corp. is expected to have an EBIT of $2,000,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $85,000, and $125,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $10,500,000 in debt and 850,000 shares outstanding. At Year 5, you believe that the company's sales will be $14,850,000 and the appropriate price-sales ratio is 2.2. The company’s WACC is 8.5 percent and the tax rate is 22 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Esther’s Egg Farm is constructing its pro forma financial statements for this year. At year end, assets were $400,000 and accounts payable (the only current liabilities account) were $125,000. Last year’s sales were $500,000. Esther’s expects to grow by 15 percent this year. Assets and accounts payable are expected to grow proportionally to sales. Common stock currently equals $140,000, and retained earnings are $98,000. Esther’s plans to sell $15,000 of new common stock this year. The firm’s profit margin on sales is 6 percent, and 40 percent of earnings will be paid out as dividends. How much new long-term debt financing will Esther’s need this year to finance its expected growth? Esther’s is currently operating at full capacity.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS