User Account

All Pages

Calculate the company cost of equity

Assignment Help Finance Basics
Reference no: EM132703748

An analyst obtains the following information from a company's latest financial statements and other sources:

Earnings per share:                           $2                   Risk-free rate:                        4%      

Book value of Equity per share:       $20                Expected market return:     9%

Dividend per share:                          $1                   Beta:                                      1.2

The analyst forecast that the company's earnings and dividends will grow by 10% next year and then by 5% every year infinitely. You also expect the clean surplus condition holds and the cost of equity will remain unchanged in the future.

Please answer all sub-questions below.

a. Calculate the company's cost of equity.

b. Forecast the company's dividend per share in each of the next three years. Use the discounted dividend model to find the company's value of equity.

c. Forecast the company's abnormal earnings per share for each of the next three years. Use the discounted abnormal earnings model to find the company's value of equity.

Reference no: EM132703748

Questions Cloud

What role do international hr managers play : It has been argued that Corporate Social Responsibility (CSR) and ethical conduct is gaining increasing prominence in global business culture, as many.
Explain the changes in the environment : HR directors identify forces driving change in the environment, strategy choices, firm's structure, and outcomes reflected in firm performance.
Analyse the tools leaders use to help employees : Analyse the tools leaders use to help employees and themselves to cope with stress and burnout during COVID-19. The response must be typed.
Find out the period used-periodic rate : "Complete the following using the present value formula or financial calculator. LU 19-2(2)
Calculate the company cost of equity : An analyst obtains the following information from a company's latest financial statements and other sources:
Find out the share price of the firm : What's the share price of the firm if the discount rate of 20-percent?
Differences between a job description and job specifications : What are the differences between a job description and job specifications? Why it is important to have both? In building a job description.
Explain what is meant by open interest : Explain what is meant by open interest. Why does the open interest usually decline during the month preceding the delivery month?
What is the total cash flow of the project : Pharm Co., a pharmaceutical company has successfully created a new drug. Assume that Pharm only wants to produce the drug for the next three years.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd