Calculate present value of each of anticipated dividends

Assignment Help Financial Management

Reference no: EM131982908

Beasley Ball Bearings paid a $4 dividend last year. The dividend is expected to grow at a constant rate of 3 percent over the next four years. The required rate of return is 12 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

b. Calculate the present value of each of the anticipated dividends at a discount rate of 12 percent. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

c. Compute the price of the stock at the end of the fourth year (P4). (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

d. Calculate the present value of the year 4 stock price at a discount rate of 12 percent. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

e. Compute the current value of the stock. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

f. Use the formula given below to show that it will provide approximately the same answer as part e. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

P0=D1/Ke − g

g. If current EPS were equal to $5.15 and the P/E ratio is 1.2 times higher than the industry average of 8, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

h. By what dollar amount is the stock price in part g different from the stock price in part f? (Do not round intermediate calculations. Round your final answer to 2 decimal.

Reference no: EM131982908

Questions Cloud

Explain the steps in developing and obtaining for a policy : If there is no existing policy, explain the step in developing and obtaining for a policy within either your organization or a typical health care organization.

Calculate the price of a share of the stock today : Earnings and didvidends per share are expected to grow at a rate of 18% during the next 2 years, 15% in the third year and 6% thereafter.

The loan stated interest rate : For real-estate mortgages, with a term or thirty years, a good rule of thumb is that two points raise the APR 25% above the loan’s stated interest rate.

What recommendations would you suggest to improve compliance : What recommendations would you suggest to improve organizational compliance with regulatory requirements?

Calculate present value of each of anticipated dividends : Calculate the present value of each of the anticipated dividends at a discount rate of 12 percent. Compute the price of the stock at the end of the fourth year.

Discuss the importance of the iom future of nursing report : Discuss the importance of the IOM Future of Nursing report related to nursing practice, nursing education and nursing workforce development.

Discuss briefly the single-person decision theory : Discuss briefly the single-person decision theory under the conditions of uncertainty.

Compute the machines irr : Scotia Family Health Team is investigating purchasing an ultrasound machine for use in its patient clinic.

Define when cloud computing : Define when cloud computing might make sense for a start-up company and when it might make sense for a large corporation

User Account

All Pages