What is target stock price in five years

Assignment Help Financial Management

Reference no: EM131876136

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 $1.15. The dividends are expected to grow at 20 percent over the next five years. In five years, the estimated payout ratio is 40 percent and the benchmark PE ratio is 21. What is the target stock price in five years? What is the stock price today assuming a required return of 12 percent on this stock?

Please show me how to find the solution using Microsoft Excel. I need to know how the formula/inputs used in the calculations.

Reference no: EM131876136

Questions Cloud

What are some possible advantages of Net-Work Docs : How are the founders balancing pressures for global integration and local responsiveness? Is their global strategy likely to proceed? Why or why not?

Boundary for value of european vanilla put option : What is the lower boundary for the value of a European vanilla put option on this asset with strike price of $80?

Explain why the given issue is important to you personally : Explain why this issue is important to you personally. In other words, why did you select this issue to investigate?

Prepare the journal entry for the issuance of bonds by fowl : On January 1, 2013, Fowl Products issued $80 million 6%, Prepare the journal entry for the issuance of bonds by Fowl

What is target stock price in five years : What is the target stock price in five years? What is the stock price today assuming a required return of 12 percent on this stock?

What are you trying to create : "Glow" is a new cosmetic company that is about to be launched in the market. "Glow" believes that Mother Nature has an answer for almost everything.

Method for increasing your company short-term cash position : Which of the following is an internal method for increasing your company's short-term cash position?

Discussing the individual equipment reliabilities : Glen Evans is an emergency medical technician for a local rescue team and is routinely called on to render emergency care to citizens facing crisis situations.

How the appearance of graffiti in a society might influence : Assignment: Short Response Guidelines- Describe how the appearance of graffiti in a society might influence the people living there.

User Account

All Pages