Find the terminal stock price using a benchmark PE ratio

Assignment Help Financial Management

Reference no: EM131044103

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.45. The dividends are expected to grow at 15 percent over the next five years. In five years, the estimated payout ratio is 45 percent and the benchmark PE ratio is 27.

What is the target stock price in five years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Target stock price $

What is the stock price today assuming a required return of 12.5 percent on this stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock price $

Reference no: EM131044103

Questions Cloud

Report about bank of america organization information plan : Prepare a report about BANK OF AMERICA ORGANIZATIOn information assurance plan. Assume that you are the lead network security expert in your organization.

Calculate projects npv-irr and payback period : A project has an initial cost of $100,00. The project has an estimated cost of capital of 10%. Calculate project's NPV, IRR, and payback period.

Weekly marketing analysis paper : This is the third of six Weekly Marketing Analysis Papers you will complete in this course. Pricing strategies for products or services usually involve three main ways to increase profits. A business can cut costs, sell more, or find more profit w..

What is the value of your portfolio if the stock price : You buy 100 shares of stock at $50 per share and sell a single covered call on them for $1 per contract at the same time. The call has an exercise price of $55. What is the value of your portfolio if the stock price is still at $50 at expiration? At ..

Find the terminal stock price using a benchmark PE ratio : In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. What is the target stock price in five years?..

Business issue identification : For this discussion, you will gather sources of information based on a health care business issue, which can be administrative or managerial. In this discussion, you will define your problem and identify the goals you are trying to achieve.

Design the deep beam using the strut and tie method : The deep beam given in the Figure below has a width of 508 mm and a total height of 2032 mm. The deep beam carries two concentrated factored loads, Vu = 1601 kN each. Four bearing plates were provided at supports and loading locations that have dimen..

Noncompliance with state and federal statutes : Discuss what techniques you would use to reduce fines, penalties, or losses from noncompliance with state and federal statutes and regulations.

Short report on germany fdi environment : Write a short report short report on Germany's FDI environment, regulations and ease of doing business. Use hyperlink below. Minimum 500 words.

User Account

All Pages