Define the forecast abnormal earnings growth

Assignment Help Finance Basics

Reference no: EM131487874

Question: Using Earnings Growth Forecasts to Challenge a Stock Price: Toro Company (Medium) Toro Company, a lawn products maker based in Minnesota, traded at $55 per share in October 2002. The firm had maintained a 20 per cent annual EPS growth rate over the previous five years, and analysts were forecasting $ 5.30 per share earnings for the fiscal year ending October 2003, with a 12 percent growt h rate for the five years thereafter. Use a required return of I 0 percent in answering the following questions.

a. How much is a share of Toro worth based on the forward earnings of $5.30 only (ignoring any subsequent earnings growth)?

b. Toro maintains a dividend payout of 10 per cent of earnings. Based on the forecasted EPS growth rate of 12 percent, forecast cum-dividend earnings for the five years, 2004-2008.

c. Forecast abnormal earnings growth (in dollars) for the years 2004-2008.

d. Do your calculations indicate whether or not Toro is appropriately priced?

Reference no: EM131487874

Questions Cloud

Main goals of organization is to maximize the value of firm : For all organizations, especially public-traded companies, one of the main goals of the organization is to maximize the value of the firm.

Determining the organization behavior : The question is related which the "Organization Behavior" subject, the question are as per below

Expected return and standard deviation of the aa portfolio : Find the proportion invested in JJ, the expected return and standard deviation of the AA portfolio.

The clinton administrations law enforcement strategy : Which particular challenges, posited in the U.S. Department of Justice (1999) reading do you think may present our greatest opportunity.

Define the forecast abnormal earnings growth : Using Earnings Growth Forecasts to Challenge a Stock Price: Toro Company (Medium) Toro Company, a lawn products maker based in Minnesota, traded at $55.

Fluid and dynamic business environment : When we started the class we learned that the 21st century manager must be agile to survive the fluid and dynamic business environment of this century.

What is the revised earnings forecast : Abnormal Earnings Growth Valuation and Accounting Methods (Hard) Refer back to the valuation. In the proforma there, an analyst forecasted earnings of$388.

Watch the video a med star story : Identify three to five major concepts of systems thinking and then explain how they were applied in the Med Star Story.

Compare the normal p-e to the actual traded p-e at the time : Is a Normal Forward P/E Ratio Appropriate? Maytag Corporation (Easy) A share of Maytag Corp., another appliance manufacturer, traded at $28.80 in January 2003.

User Account

All Pages