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 $ 73.32 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 Answer is complete but not entirely correct. at a rate of 23 % over the next year.
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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 $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 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 $18.00, all of which was reinvested in the company. The firm's expected ROE for the next five years is 16% 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 11%, 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 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…
- 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 $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 ?es The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $6.90, all of which was reinvested in the company. The firm's expected ROE for the next four years is 26% 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 25% per year. GG's market capitalization rate is 25% 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 $ Price should 35.90 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? % over the next year at a rate of
- S 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 $17.50, 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 45% of its earnings in cash dividends, which it will continue to 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 25% of…DFB, Inc. expects earnings next year of $4.48 per share, and it plans to pay a $2.54 dividend to shareholders (assume that is one year from now). DFB will retain $1.94 per share of its earnings to reinvest in new projects that have an expected return of 15.7% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 11.8%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $3.54 per share at the end of this year and retained only $0.94 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesti in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…DFB, Inc. expects earnings next year of $5.99 per share, and it plans to pay a $4.36 dividend to shareholders (assume that is one year from now). DFB will retain $1.63 per share of its earnings to reinvest in new projects that have an expected return of 14.8% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 12.6%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $5.36 per share at the end of this year and retained only $0.63 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…
- DFB, Inc. expects earnings next year of $4.41 per share, and it plans to pay a $2.02 dividend to shareholders (assume that is one year from now). DFB will retain $2.39 per share of its earnings to reinvest in new projects that have an expected return of 15.7% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 12.8%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $3.02 per share at the end of this year and retained only $1.39 per share in earnings. That is, it chose to pay a higher dividend instead of a. What growth rate of earnings would you forecast for DFB? DFB's growth rate of earnings is%. (Round to one decimal place.)DFB, Inc. expects earnings next year of $5.63 per share, and it plans to pay a $4.11 dividend to shareholders (assume that is one year from now). DFB will retain $1.52 per share of its earnings to reinvest in new projects that have an expected return of 14.8% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 12.5%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $5.11 per share at the end of this year and retained only $0.52 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…DFB, Inc. expects earnings next year of $5.87 per share, and it plans to pay a $3.39 dividend to shareholders (assume that is one year from now). DFB will retain $2.48 per share of its earnings to reinvest in new projects that have an expected return of 15.5% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next dividend is due in one year. a. What growth rate of earnings would you forecast for DFB? b. If DFB's equity cost of capital is 11.9%, what price would you estimate for DFB stock today? c. Suppose instead that DFB paid a dividend of $4.39 per share at the end of this year and retained only $1.48 per share in earnings. That is, it chose to pay a higher dividend instead of reinvesting in as many new projects. If DFB maintains this higher payout rate in the future, what stock price would you estimate for the firm now? Should DFB raise its…