Compute the expected growth rate in internal earnings

Assignment Help Financial Management

Reference no: EM131882025

Kokoliko PLC has maintained a constant dividend pay-out ratio over the last 5 years and intends to continue with the same ratio into the future. Last year EPS was $80 and $32 was paid out as dividends while the P/E ratio was 8. Kokoliko has a standard deviation of 4% and a beta of 1.3. Over the coming year, the following are expected:?

ROE of 15% ?

Return on Government securities of 7% ?

LuSE index return of 12%

Required:

i. Compute the expected growth rate in internal earnings.

ii. Compute the market price of Kokoliko’s shares last year.

iii. Based on the expected values, compute the intrinsic value of Kokoliko’s share and determine if the shares are over-valued or undervalued given a market price of $50 today.

Reference no: EM131882025

Questions Cloud

What tensions and challenges might face each member : What tensions and challenges might face each member of the TWT in a real-life setting of serving on a group that represents various cultures?

Perpetuity-due providing geometric series : An insurance company purchases a perpetuity-due providing a geometric series of quarterly payments for a price of 100,000

How you can develop your career potential : Dealing with the Press In this age of 24-hour cable news channels, tabloid news shows, and aggressive local and national news reporters intent on exposing.

Expects some returns through capital gains and dividends : After that period he expects some returns through capital gains and dividends.

Compute the expected growth rate in internal earnings : Compute the expected growth rate in internal earnings. Compute the market price of Kokoliko’s shares last year.

Estimate how much money will be required to fund such a trip : Additional information gathering at Siemens's mock airport is a good idea, but who to send? Identify how many and which type of managers to recommend.

Explain the impact of stock risk on P and E ratios : Explain the impact of stock risk on P/E ratios.

What kind of employee feedback would be most helpful : How do you give employees a say in the process of deciding what gets cut? How much of a say do they get? What kind of employee feedback would be most helpful.

Treasury bills and fixed income securities : Zambia is a renowned fund management company that specializes in off-shore investments in equity, treasury bills and fixed income securities.

User Account

All Pages