The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next fiveyears. Its latest EPS was $18.00, all of which was reinvested in the company. The firm's expected ROE for the next five years is 16% peryear, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm's ROE on new investmentsis expected to fall to 11%, and the company is expected to start paying out 30% of its earnings in cash dividends, which it will continueto do forever after. DEQS's market capitalization rate is 24% per year.Required:a. What is your estimate of DEQS's intrinsic value per share?b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year?c. What do you expect to happen to price in the following year?d. What is your estimate of DEQS's intrinsic value per share if you expected DEQS to pay out only 10% of earnings starting in year 6?Complete this question by entering your answers in the tabs below.Required ARequired B Required C Required DWhat do you expect to happen to price in the following year?Note: Do not round intermediate calculations. Round your dollar value to 2 decimal places.Price in two years$40.51 X

Investment valuation is a critical aspect of financial analysis and decision-making, aiming to…

Answered: The Digital Electronic Quotation System…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $17.00, all of which was reinvested in the company. The firm's expected ROE for the next five years is 15% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm's ROE on new investments is expected to fall to 10%, and the company is expected to start paying out 20% of its earnings in cash dividends, which it will continue to do forever after. DEQS's market capitalization rate is 26% per year. Required: a. What is your estimate of DEQS's intrinsic value per share? b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? c. What do you expect to happen to price in the following year? d. What is your estimate of DEQS's intrinsic value per share if you expected DEQS to pay out only 15% of…
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $13.00, all of which was reinvested in the company. The firm's expected ROE for the next five years is 17% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm's ROE on new investments is expected to fall to 12%, and the company is expected to start paying out 35% of its earnings in cash dividends, which it will continue to do forever after. DEQS's market capitalization rate is 20% per year. Required: What is your estimate of DEQS's intrinsic value per share? Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? What do you expect to happen to price in the following year? What is your estimate of DEQS's intrinsic value per share if you expected DEQS to pay out only 15% of earnings starting…
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $11.00, all of which was reinvested in the company. The firm's expected ROE for the next five years is 15% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm's ROE on new investments is expected to fall to 14%, and the company is expected to start paying out 30% of its earnings in cash dividends, which it will continue to do forever after. DEQS's market capitalization rate is 15% per year. a. What is your estimate of DEQS's intrinsic value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic value b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? (Round your dollar value to 2 decimal places.) Price will by % per year until year 6.
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $15.50, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 19% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to 14%, and the company is expected to start paying out 35% of its earnings in cash dividends, which it will continue to do forever after. DEQS’s market capitalization rate is 22% per year. What is your estimate of DEQS’s intrinsic value per share if you expected DEQS to pay out only 15% of earnings starting in year 6?
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $11.50, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 20% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to 15%, and the company is expected to start paying out 35% of its earnings in cash dividends, which it will continue to do forever after. DEQS’s market capitalization rate is 19% per year. a. What is your estimate of DEQS’s intrinsic value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? (Round your dollar value to 2 decimal places.) . c. What do you expect to happen to…
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $6.20, all of which was reinvested in the company. The firm's expected ROE for the next four years is 19% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm's ROE on new investments is expected to fall to 18% per year. GG's market capitalization rate is 18% per year. a. What is your estimate of GG's intrinsic value per share? (Round your answer to 2 decimal places.) GG's intrinsic value b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? Price should at a rate of % over the next year.
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $6.20, all of which was reinvested in the company. The firm's expected ROE for the next four years is 19% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm's ROE on new investments is expected to fall to 18% per year. GG's market capitalization rate is 18% per year. Required: a. What is your estimate of GG's intrinsic value per share? Note: Round your answer to 2 decimal places. b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? Complete this question by entering your answers in the tabs below. Required A Required B What is your estimate of GG's intrinsic value per share? Note: Round your answer to 2 decimal places. GG's intrinsic value
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $5.80, all of which was reinvested in the company. The firm's expected ROE for the next four years is 24% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm's ROE on new investments is expected to fall to 23% per year. GG's market capitalization rate is 23% per year.a. What is your estimate of GG's intrinsic value per share? GG's intrinsic value = b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? Price should increase or decrease at a rate of _________% over the next year.
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $19.50, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 15% per year, and during this time it is expected to continue to reinvest all of its earnings. DEQS’s Price Earnings Ratio is 5 and its market capitalization rate is 26% per year. At the beginning of Year 2, DEQS’s market price is $ 150 per share. Is this stock a better long purchase for your portfolio or a sale or a short ?? AND WHY ?
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $5.50, all of which was reinvested in the company. The firm's expected ROE for the next four years is 21% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm's ROE on new investments is expected to fall to 20% per year. GG's market capitalization rate is 20% per year. a. What is your estimate of GG's intrinsic value per share? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. GG's intrinsic value $ Price should 73.32 x b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? increase X Answer is complete but not entirely correct. at a rate of 23 X % over the next year.
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $5, all of which was reinvested in the company. The firm’s expected ROE for the next four years is 20% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm’s ROE on new investments is expected to fall to 15% per year. GG’s market capitalization rate is 15% per year.a. What is your estimate of GG’s intrinsic value per share?b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year?
Q2. The Dynamic Digital Corporation (DDC) pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $12, all of which was reinvested in the company. The firm's expected ROE for the next five years is 30% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm's ROE on new investments is expected to fall to 10%, and the company is expected to start paying out 40% of its earnings in cash dividends, which it will continue to do forever after. DDC's market capitalization rate is 14% per year. a. What are the growth rates of the growth periods (year 1-5 and year 6)? (.. b. What is your estimate of DDC's intrinsic value per share? ( C. What do you expect to happen to price in the following year (year 1)? ( } d. What do you expect to happen to price for year 2² ( ")

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