Reference no: EM131057650
Encore International
Data Item 2015 Value
Earnings per share (EPS) $6.25
Price per share of commom stock $40.00
Book value of commom stock equity $60,000,000
Total commom shares outstanding $2,500,000
Common stock dividend per share $4.00
A) What is the firm's current book value per share?
B) What is the firm's current P/E ration ?
C) (1) What is the current required return for Encore stock? (2) What will be the new required return for Encore stock assuming that the firm expands into European and Latin America markets as planned?
D) If the securities analysts are correct and there is no growth in future dividends, what will be the value per share of the Encore stock? (Note : Use the new required return on the company's stock here.)
Jordan Ellis believed that the company could maintain a constant annual growth rate in dividends per share of 6 % in the future, or possibly 8 % for the next two years and 6 % thereafter. Ellis based his estimates on an established long-term expansion plan into European and Latin American markets. Venturing into these markets was expected to cause the risk of the firm, as measured by risk premium on its stock, to increase immediately from 8.8 % to 10%. Currently the risk free rate is 6 %
E) If Jordan Ellis's preedictions are correct, what will be the value per share of Encore stock if the firm maintains a constant annual 6% growth rate in future dividends (Note: Continue to use the new required return here)
F) Compare the current (2015) price of the stock and the stock values found in parts a, d, and e. Discuss why these values may differ. Which valuation method do you believe most clearly represents the true value of the Encore stock.
Outline the different types of political risks
: Outline the different types of political risks, and also give a recent example of each. Also state financing issues involved with each type of these risks. (approx. 2 double spaced pages).
|
Cost of capital-sourcing debt and equity globally
: Find a recent (January 2016-present) article related to a topic we discussed in the course (international parity conditions, exchange rate exposure, cost of capital, sourcing debt and equity globally, foreign direct investment strategies/motivations,..
|
What is the effect of this on the performance of the hedge
: A portfolio manager plans to use a Treasury bond futures contract to hedge a bond portfolio over the next three months. The portfolio is worth $100 million and will have a duration of 4.0 years in three months. Suppose that all rates increase over th..
|
Calculate the quoted futures price for the contract
: It is March 10, 2011. The cheapest-to-deliver bond in a December 2011 Treasury bond futures contract is an 8% coupon bond, and delivery is expected to be made on December 31, 2011. Coupon payments on the bond are made on March 1 and September 1 each ..
|
What is the current required return for encore stock
: What is the current required return for Encore stock? What will be the new required return for Encore stock assuming that the firm expands into European and Latin America markets as planned? If the securities analysts are correct and there is no grow..
|
Evaluating two different cookie-baking ovens
: You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $69,000, has a 5-year life, and has an annual OCF (after tax) of –$11,100 per year. The Keebler CookieMunster costs $95,500, has a 7-year life, and has an annual OCF (after..
|
Bond paying semiannual interest for price
: Jerry just purchased a bond paying semiannual interest for a price of $1,000. Yields on bonds of similar risk are 9.8%. The bond has a face value of $1,000. Based on this information, the coupon rate of the bond is:
|
Cause trust to be treated as grantor trust
: Which of the following would NOT cause a trust to be treated as a grantor trust? A. The grantor's spouse may substitute trust assets for other property of equal value B. The grantor's spouse is a potential trust beneficiary C. The grantor's spouse se..
|
What would your portfolios new beta be
: Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 0.94. What would your portfolio's new beta be?
|