Find the terminal stock price using benchmark pe ratio

Assignment Help Financial Management

Reference no: EM131575614

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 $1.31. The dividends are expected to grow at 16 percent over the next five years. The company has a payout ratio of 30 percent and a benchmark PE of 19. The required return is 14 percent.

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 price in 5 years $

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

Stock price today $

Reference no: EM131575614

Questions Cloud

Determine number of samples that must be tested each year : Determine the number of samples that must be tested each year in order to justify the complete lab.

What final payment will the bank require : what final payment will the bank require you to make so that it is indifferent to the two forms of? payment?

What is the formula for the expected return of portfolio : What is the formula for Expected Return of a Single Stock? What is the formula for the Expected Return of a Portfolio?

Directly related with both balance sheet-income statement : describe how they can be directly related with both balance sheet and income statement.

Find the terminal stock price using benchmark pe ratio : find the “terminal” stock price using a benchmark PE ratio. What is the target stock price in five years? What is the stock price today?

What is dividend growth rate : The company just paid an annual dividend of $1.04 per share. What is the dividend growth rate?

Calculate the combined value of the proposed acquisition : Calculate the combined value of the proposed acquisition. Calculate the proposed acquisition premium.

Calculate after-tax rate cash flows and net present value : Calculate the after-tax rate cash flows and the net present value of the cash outflows under each alternative.

Investors are applying to renegotiated cash flows : What is the true discount rate (nominal annual rate with semi-annual compounding) investors are applying to the renegotiated cash flows?

User Account

All Pages