Reference no: EM131444276
Suppose that a firm’s recent earnings per share and dividend per share are $3.10 and $2.10, respectively. Both are expected to grow at 7 percent. However, the firm’s current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected to fall to 26 within five years.
Compute the dividends over the next five years. (Do not round intermediate calculations. Round your final answer to 3 decimal places.)
Dividends Years First year $____________?
Second year $ ________________?
Third year $ ______________?
Fourth year $ _____________?
Fifth year $ _______________?
Compute the value of this stock in five years. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) _________?
Stock price $ Calculate the present value of these cash flows using a 9 percent discount rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Present value $_____________?
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: Suppose that a firm’s recent earnings per share and dividend per share are $3.10 and $2.10, respectively. Both are expected to grow at 7 percent. However, the firm’s current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected t..
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