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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 $1.22. The dividends are expected to grow at 17 percent over the next five years. In five years, the estimated payout ratio is 45 percent and the benchmark PE ratio is 24. After five years, the earnings are expected to grow at 7 percent per year. The required return is 13 percent.
What is the target stock price in five years?
What is the stock price today?
The Wildwood Fund sells Class A shares with a front-end load of 5% and Class B Shares with 12b-1 fees of 6.0% annually but no load. If you plan to sell the fund after 7 years, are Class A or Class B shares the better choice? Assume a 15% annual retur..
What was the premium on the Dec. BABA 118 put? Was this option in or out of the money? What was the intrinsic value of this put? What is the time value?
The United States purchased Alaska in 1867 for $7.2M (where M stands for million). Assume that federal tax revenue from the state of Alaska (net federal expenditures) is $55.1M in 2012 and that tax revenue started in 1868 and has steadily increased b..
Frederickson Office Supplies recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding th..
discuss financial management in nonprofit organizations and write an essay that compares and contrasts the application
Tanner Tavern writes four checks a day for an average amount of $5,400 each. These checks generally clear the bank four days after they are written. In addition, the firm generally receives and deposits checks amounting to $18,700 each day. All depos..
Kandy Corporation is considering a replacement investment. The machine currently in use was originally purchased two years ago for $65,000. Tax-allowable depreciation is $13,000 per year for five years.
FARO Technologies, whose products include portable 3D measurement equipment, recently had 17 million shares outstanding trading at $42 a share. Suppose the company announces its intention to raise $200 million by sell new shares. What do market signa..
A 10-year bond of a firm in severe financial distress has a coupon rate of 11% and sells for $915. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the..
Rentz Rvs Inc. (RRV) is presently enjoying relatively high growth because of a surge in the demand for recreational vehicles. What is the intrinsic value of RRV's common stock?
You are the writer of a put option on Apple Inc. common stock. The option has an exercise price of $122 and the stock is currently trading at $124.70. The option premium is $3.60 per contract. What is your net profit/loss if Apple Inc. stock price in..
Present Value for Various Compounding Periods. Find the present value of $775 due in the future under each of the following conditions. Round your answers to the nearest cent.
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