Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Five years ago, Weed Go Inc. earned $2.10 per share. Its earnings this year were $3.20. What was the growth rate in earnings per share (EPS) over the 5-year period?
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- The following table gives Foust Company’s earnings per share for the last 10 years.The common stock, 7.8 million shares outstanding, is now (1/1/19) selling for $65.00 pershare. The expected dividend at the end of the current year (12/31/19) is 55% of the 2018EPS. Because investors expect past trends to continue, g may be based on the historicalearnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) The current interest rate on new debt is 9%; Foust’s marginal tax rate is 40%, and its targetcapital structure is 40% debt and 60% equity.a. Calculate Foust’s after-tax cost of debt and common equity. Calculate the cost of equityas rs = D1/P0 + g.b. Find Foust’s WACC.Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).Editorial review has deemed that any suppressed content does not…arrow_forwardFive years ago, Weed Go Inc. earned $2.80 per share. Its earnings this year were $3-70. What was the growth rate in earnings per share (EPS) over the 5-year period? O a. 26.43% O b. 7.22% O c. 5.73% O d. 18.35% O e.4.75%arrow_forwardSee image below - This is all the information providedZeta Company recently paid a dividend of $4.00 per share and had earnings after taxes of $100.00, per share. This dividend payout ratio was the same as the company's historical average payout ratio. Also, analysts know the company's payout ratio has a standard deviation of ( rounded)arrow_forward
- Lawrence Industries' most recent annual dividend was $1.98 per share (D Subscript 0=$1.98), and the firm's required return is 13%. Find the market value of Lawrence's shares when dividends are expected to grow at 15% annually for 3 years, followed by a 4% constant annual growth rate in years 4 to infinity.arrow_forwardIt was reported last week that Blue Bell Enterprises earned $18.5 million this year. The report also stated that the firm’s return on equity is 11 percent. The firm retains 80 percent of its earnings. What will next year's earnings be? Round to the nearest whole dollar.arrow_forwardThe following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.8 million shares outstanding, is now (1/1/22) selling for $77.00 per share. The expected dividend at the end of the current year (12/31/22) is 45% of the 2021 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.) Year EPS Year EPS 2012 $3.90 2017 $5.73 2013 4.21 2018 6.19 2014 4.55 2019 6.68 2015 4.91 2020 7.22 2016 5.31 2021 7.80 The current interest rate on new debt is 8%; Foust's marginal tax rate is 25%; and its target capital structure is 30% debt and 70% equity. a. Calculate Foust's after-tax cost of debt. Round your answer to two decimal places. 6.00 Calculate Foust's cost of common equity. Calculate the cost of equity as rs = D1/Po + g. Do not round intermediate calculations. Round your answer to two decimal places. -5.44 % b. Find Foust's WACC. Do not…arrow_forward
- Radon Homes' current EPS is $6.50. It was $4.42 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells or $36. a. Calculate the historical growth rate in earnings. (Hint: This is a 5 - yeargrowth period.)b. Calculate the next expected dividend per share, DI . (Hint: DO = o.4($6.50)= $2.60) Assume that the past growth rate will continue.c. What is Radon's cost of equity, rs ?arrow_forwardKeating Company had a retained earnings balance of $5,820 at the end of last year. This year the company projects sales of $12,850 with a 6% net profit margin and a 25% dividend payout ratio. Forecast the balance of retained earnings at the end of this year..arrow_forwardSuppose that a firm's recent earnings per share and dividend per share are $3.10 and $2.10, respectively. Both are expected to grow 7 percent. However, the firm's current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected to fall to 26 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your answers to 3 decimal places Years First year Second year Third year Fourth year Fifth year Dividends Compute the value of this stock in five years. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock pricearrow_forward
- 5) Big Corporation had the following sales over the last 4 years; Year Sales (in 000s) 1 225.00 2 236.25 3 243.125 4 248.00 a) What was the growth rate in sales between years 1 & 2; b) What is the growth rate in sales between years 3 & 4; c) What is the average annual growth rate for these years?arrow_forwardTen years ago, Kronan Corporation earned $0.50 per share. Its earnings this year were $2.20. What was the growth rate in earnings per share (EPS) over the 10-year period? 15.17% 15.97% 16.77% 17.61% 18.49%arrow_forwardMicrosoft Corp. reported earnings per share of $1.65 in 2006 and $2.55 in 2016. At what annual rate did earnings per share grow over this period? (Round your answer to 1 decimal place.) Annual growth rate %arrow_forward
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