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Calculate the terminal value at the end of year two

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Reference no: EM133049024

Question - Malaika Moroka is evaluating the shares of Silver Lakes Inc. The dividends and earnings have been projected for two years. Silver Lakes Inc has a required rate of return of 13.42% and the projected earnings are R8.10 (E1) and R9.50 (E2). The following additional information is available: Industry average ROE = 0.14

Trailing industry average P/E = 12

Average dividend payout rate for mature companies in the market = 0.25

Required -

1. Calculate the terminal value at the end of year two of Silver Lakes Inc based on the comparables.

1. R78.50

2. R97.20

3. R114.00

2. The terminal value of Silver Lakes Inc. based on the Gordon growth model is .... the terminal value based on comparables.

1. lower than

2. the same as

3. higher than

Reference no: EM133049024

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