Determine the growth rate of the company

Assignment Help Accounting Basics
Reference no: EM13252370

An analyst uses the constant growth model to evaluate a company with the following data for a company:
Leverage ratio (asset/equity): 1.8
Total asset turnover: 1.5
Current ratio: 1.8
Net profit margin: 8%
Dividend payout ratio: 40%
Earnings per share in the past year: $0.85
The required rate on equity: 15%
Based on an analysis, the growth rate of the company will drop by 25 percent per year in the next two years and then keep it afterward. Assume that the company will keep its dividend policy unchanged.
1. Determine the growth rate of the company for each of next three years.

2. Use the multi-period DDM to estimate the intrinsic value of the company's stock.

3. Suppose after one year, everything else will be unchanged but the required rate on equity will decrease to 14%. What would be your holding period return for the year?

Reference no: EM13252370

Questions Cloud

How intrinsic work values and extrinsic work values impact : Discuss how intrinsic work values and extrinsic work values impact managerial decisions as related to output by employees. Support your response by giving at least one example of each type, extrinsic and extrinsic.
At what time has the energy stored in the inductor decrease : The magnitude of the current in a RL circuit decreases at a rate of 2000 A/s at t=0 and 100 A/s at t=.2s. At what time has the energy stored in the inductor decreased 1 percent of its intial value.
How high will the ball go if the gun is aimed vertically : A 36 g ball is shot from a spring gun whose spring has a force constant of 529 N/m. The spring can be compressed 4 cm. How high will the ball go if the gun is aimed vertically
Explain what is the value of the standard free energy change : The decomposition of phosphorus pentachloride by the reaction: PCl5(g) PCl3 (g) + Cl2 (g) has a Kp = 1.8 at 450C. What is the value of the standard free energy change
Determine the growth rate of the company : Determine the growth rate of the company for each of next three years.
What is the mass percentage of each element in acetic acid : acetic acid contains only C,Hand O.An 8.48mg sample of acetic acid is completely burned. it gives 12.42mg of carbone dioxide and 5.08 mg of water. what is the mass percentage of each element in acetic acid
Which is most critical to ensuring organization success : Of the " four functions of management", which is most critical to ensuring organization success? You are expected to discuss each one in some detail and then select and defend your selection.
Explain how many grams increase or decrease in mass : if 1.0 mol of electrons flows through the cell, how many grams increase or decrease in mass will the silver electrode undergo
Which one of the four presents the least difficulty : Defend your answers. You may not simply say that they all the same. Give at least one example of each one that tends to make it more or less of a challenge.

Reviews

Write a Review

Accounting Basics Questions & Answers

  What other kinds of comparisons might an analyst make

What is the basic purpose for examining trends in a company's financial ratios and other data? What other kinds of comparisons might an analyst make?

  Compute the overhead controllable variance

Earth Company expects to operate at 86% of its productive capacity of 52,000 units per month. At this planned level, the company expects to use 26,832 standard hours of direct labor.

  What amount was smith entitled to claim for realty taxes

In 2009, Smith paid $6,000 to the tax collector of Big City for realty taxes on a two-family house owned by Smith's mother. Of this amount, $2,800 covered back taxes for 2008, and $3,200 covered 2009 taxes. Smith resides on the second floor of the..

  Amount of child tax credit

Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return?

  Account paid-in capital in excess of par

In applying the book value method, what amount should Morgan credit to the account "paid-in capital in excess of par," as a result of this conversion?

  Franco capital account balance

At the beginning of the year, the capital account balances were: franco capital, $40000; elisa capital, $58000. franco's capital account balance at the end of the year is ??

  Accounting rate of return on original investment

The company uses the straight-line method of depreciation with no mid-year convention. What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid.

  Define difference between sales journal and accounts

Can you distinguish between accuracy of tests of gross accounts receivable and tests of the realizable value of receivables?

  Assist management in computing possible damages

What accounting and other information could you look at to assist management in computing possible damages?

  Fiscal year without negative tax effects

How much salary must Gander pay Patrick during the period November 1 through December 31, 2008, to permit the corporation to continue to use its fiscal year without negative tax effects?

  Basics of constructive receipt income

Which of the following is not considered "constructive receipt" income in 2010:

  Insurance expense in roro financial statements

What amounts should be reported for prepaid insurance and insurance expense in Roro's financial statements for the three months ended March 31, 2010?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd