Compute the value of this stock price in five years

Assignment Help Financial Management

Reference no: EM132007239

Suppose that a firm's recent earnings per share and dividend per share are $3.25 and $2.80, respectively. Both are expected to grow at 8 percent. However, the firm's current P/E ratio of 29 seems high for this growth rate.

The P/E ratio is expected to fall to 25 within five years.

Compute the dividends over the next five years. (Do not round intermediate calculations and round your final answers to 3 decimal places.)

Dividends Years First year $ Second year $ Third year $ Fourth year $ Fifth year $

Compute the value of this stock price in five years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Stock price $

Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Present value $

Reference no: EM132007239

Questions Cloud

Conducting a financial statement analysis : Regardless of the specific line of business, should all healthcare businesses use the same set of ratios when conducting a financial statement analysis?

Company cash dividend be in seven years : What will the company's cash dividend be in seven years?

. what amount of endowment principal is required to support : Suppose that a firm wishes to create an endowment for a Library. It will earn an interest of 12% per year.

Calculation of the weighted average cost of capital : What are the primary inputs in the calculation of the weighted average cost of capital?

Compute the value of this stock price in five years : The firm's current P/E ratio of 29 seems high for this growth rate. The P/E ratio is expected to fall to 25 within five years.

What is the standard deviation of the portfolio : The standard deviation of returns for Merck and Home Depot are 16% and 24%, respectively. The correlation between these two stocks is 0.19.

What would happen to the price of the cisco systems bonds : Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of the Cisco Systems bonds over time?

What was the holding period return for the stock : A stock has had returns of 16.12%, 22.11%, -25.00%, 26.14%, and 16.00% over the past five years. What was the holding period return for the stock?

What is the amount if the washing machine : What is the amount if the washing machine is paid for today?

User Account

All Pages