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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. The company has a payout ratio of 45 percent and a benchmark PE of 24. The required return is 13 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 $
what is the overall rate of return on your position for the worst case outcome?
What is the current price of a bond if it is priced to yield 2 percent, has a $1,000 face value, has 10 years to maturity, pays semiannual coupon payments, and has a coupon rate of 7 percent?
What level of sales would Swann have to obtain to generate $2,000,000 in net income?
What was the average return during the period for all Common Stocks?
The day Little Joey was born his smart Grand Parents opened an Investment Account that promised to pay 8% per year with a lump sum of $10,000. In addition, they had been investing $100 per month in the same account. Today Joey turned 18 and his Grand..
RON Ltd has the following capital structure components: Five million shares issued with a current market price of 11. Equity holders require a 12% return.
If in the opinion of a given investor a stocks expected return exceeds its required return, this suggests that the investor thinks
Suppose that one year ago, the exchange rate between the Australian dollar and the US dollar was: 1 AUD = 1.0758 USD and today the exchange rate is: 1 AUD = 1.0237 USD. Calculate the percentage change in the value of the US dollar. Calculate the perc..
Fatima wants to buy a boat that is available at two dealerships. The price of the boat is the same at both dealerships.
Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues.
Choose one of the major categories of applications of linear programming discussed in the chapter. Give an example of an application of the model.
Last year the return on total assets in Jeffrey Company was 9.5%. The total assets were 1.9 million at the beginning of the year and 2.1 million at the end of the year. The tax rate was 30%, interest expense totalled $100 thousand, and sales were $4...
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