redo to give me the accurate answer for b please in the first picture in addition redo thois problem by given me the accurate answer it is nit close to $24... Lohn Corporation is expected to pay the following dividends over the next four years: $9, $7, $3, and $1. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 12 percent, what is the current share price? If you look at stock prices over any year, you will find a high and low stock price for theyear. Instead of a single benchmark PE ratio, we now have a high and low PE ratio foreach year. We can use these ratios to calculate a high and a low stock price for the nextyear. Suppose we have the following information on a particular company over the pastfour years:Year 1Year 2 Year 3$High price $99.70Year 4$132.70 $149.33Low priceEPS74.538.98123.3090.6410.7371.32 117.8511.8113.20Earnings are projected to grow at 9 percent over the next year.a. What is your high target stock price over the next year? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)b. What is your low target stock price over the next year? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)a. High target stock priceb. Low target stock price162.77

A stock is a capital market security that allows the investor to take part in the equity interest of…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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Use the extended DuPont equation to provide a breakdown of Computrons projected return on equity. How does the projection compare with the previous years and with the industrys DuPont equation?
A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?
CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?

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