When a stock is going through a period of nonconstant growth for T periods, followed by constant growth forever, the residual income model can be modified as follows: Po - where T E t = 1 EPSt + Bt-1- Bt (1 + k) t EPST (1+g) BT x k k-g + PT (1 + k) T PT = BT+ Al's Infrared Sandwich Company had a book value of $12.95 at the beginning of the year, and the earnings per share for the past year was $3.41. Molly Miller, a research analyst at Miller, Moore & Associates, estimates that the book value and earnings per share will grow at 12.5 and 11 percent per year for the next four years, respectively. After four years, the growth rate is expected to be 6 percent. Molly believes the required return for the company is 8.2 percent. What is the value per share for Al's Infrared Sandwich Company? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value per share

When a stock is going through a period of nonconstant growth for T periods, followed by constant growth forever, the residual income model can be modified as follows: Po - where T E t = 1 EPSt + Bt-1- Bt (1 + k) t EPST (1+g) BT x k k-g + PT (1 + k) T PT = BT+ Al's Infrared Sandwich Company had a book value of $12.95 at the beginning of the year, and the earnings per share for the past year was $3.41. Molly Miller, a research analyst at Miller, Moore & Associates, estimates that the book value and earnings per share will grow at 12.5 and 11 percent per year for the next four years, respectively. After four years, the growth rate is expected to be 6 percent. Molly believes the required return for the company is 8.2 percent. What is the value per share for Al's Infrared Sandwich Company? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value per share

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

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When a stock is going through a period of nonconstant growth for T periods, followed by constant growth forever, the residual income model can be modified as follows: Ро where: EPS,+B₁-1-B₁ (1+k)' + Рт (1+k)T PT = BT + EPST (1+g)-BTXk k-g Al's Infrared Sandwich Company had a book value of $16.95 at the beginning of the year, and the earnings per share for the past year was $10.65. Molly Miller, a research analyst at Miller, Moore & Associates, estimates that the book value and earnings per share will grow at 22.50 and 21.00 percent per year for the next four years, respectively. After four years, the growth rate is expected to be 6 percent. Molly believes the required return for the company is 12.20 percent. What is the value per share for Al's Infrared Sandwich Company? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Value per share $ 3,107.92
Corenson Corp.'s expected year-end dividend is D1 = $4.00, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to b onstant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is P-? Do not round intermediate calculations. O a. $87.24 O b. $76.92 O c. $93.81 O d. $90.05 O e. $85.36
If D1 = $2.83, g (which is constant) = 2%, and P0 = $45.18, what is the stockâ€™s expected dividend yield for the coming year?Note: Enter your answer rounded off to two decimal points.Do not enter % in the answer box. For example, if your answer is 0.12345 thenenter as 12.35 in the answer box.
A firm pays a $13.80 dividend at the end of year one (D1), has a stock price of $149, and a constant growth rate (g) of 5 percent. Compute the required rate of return (Ke). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
For Company ABC, if stock price P0 = $30; dividend paid at the end of period 1 D1 = $3.00; growth rate g = 5%; What’s the required rate of return for equity holder rs = ? If the flotation cost F = 10%; What’s the required rate of return for equity holder rs = ?
Largan Co has a preterted stock outstanding with a par value of $100 and its dividend is $1 per quarter. The current stock price is $120. 1A.What is its nominal required rate of return per annual? 1B. What is the effective rate of return? show solution
If D1 = $1.15, g (which is constant) = 5.24%, and P0 = $56.45, what is the stock's expected capital gains yield for the coming year? Please work out the problem, do not use excel.
The Evanec Company's next expected dividend, D1, is $3.08; its growth rate is 4%; and its common stock now sells for $39.00. New stock (external equity) can be sold to net $31.20 per share. a. What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places. rs b. What is Evanec's percentage flotation cost, F? Round your answer to two decimal places. F = % c. What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places. re = %
ABCâ€™s lastdividend paid was $0.4, its required return is 13.3%, its growth rate is 7%,and its growth rate is expected to be constant in the future. What isSorenson’s expected stock price in 7 years, i.e., what is P7?Note: Enter your answer rounded off to two decimal points.Do not enter $ or comma in the answer box. For example, if your answer is$12.345 then enter as 12.35 in the answer box.
The Evanec Company's next expected dividend, D1, is $2.69; its growth rate is 7%; and its common stock now sells for $35.00. New stock (external equity) can be sold to net $31.50 per share. What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places. rs = % What is Evanec's percentage flotation cost, F? Round your answer to two decimal places. F = % What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places. re = %
A firm's target dividend is $4.40 and the prior-period dividend is $2.75. What is the change in dividends if the adjustment coefficient (B) is equal to 1? O $-3.30 O $3.30 00 O $1.65
You have found the following historical information for the Daniela Company: Stock price EPS Year 1 $48.09 2.54 Target price Year 2 $ 64.22 2.60 Year 3 $ 62.94 2.77 Year 4 $65.62 2.76 Earnings are expected to grow at 9 percent for the next year. Using the company's historical average PE as a benchmark, what is the target stock price in one year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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