Determine the current price of shares, Cost Accounting

Assignment Help:

2. Blue-Jay Sporting Goods is a start-up company that expects to earn $3.00 per share next year. Since the firm currently retains 100 percent of earnings to finance future growth, no dividends will be paid on the stock during the next three years. Exactly four years from today, the firm expects to pay a dividend of $5.60 per share from earnings of $8.00 per share.

From date four on, Blue-Jay expects to reinvest retained earnings at an ROA of 15 percent. The required rate of return on the company's stock is 12.5 percent. Assuming that Blue-Jay will retain the same fraction of earnings and reinvest at the same ROA from year four on,

a. determine the current price of shares in Blue-Jay and

b. explain whether and why the price earnings ratio for Blue-Jay will increase or decrease over the next four years.


Related Discussions:- Determine the current price of shares

Determine opportunity costs, Determine Opportunity Costs A company has...

Determine Opportunity Costs A company has material B in stock that originally cost Shs. 5000 for the 1000 Kshs in stores. The material is missing over from an old purchase ord

Objective type question, 9. When in the management process do managers seek...

9. When in the management process do managers seek an answer to the question "Did we meet our cost-reduction goals for non-value-adding activities?" a. Planning b. Performing c. Ev

Inventory valuation, How the FIFO, LIFO and AW problems can be solved?

How the FIFO, LIFO and AW problems can be solved?

Prepare a forecast of cashflow, A company is to produce an IC and a chip si...

A company is to produce an IC and a chip size of 120mm2 has been estimated, based on using a full-custom nMOS technology on 8" wafers. The process has a 92% yield at the wafer fab

Bird house, Develop costing for the production units to explain the manufac...

Develop costing for the production units to explain the manufacturing expenses that the proposed product will require for the first year of production. This portion requires the fo

Why different countries have different accounting standards, As a potential...

As a potential investor, what is the problem with different countries having different accounting standards? As the president of a multinational company, what is the problem with

Purchase procedure, what is the procedure of purchase of materials in large...

what is the procedure of purchase of materials in large organisation?

Direct materials and direct labor:, McDaniel Company manufactures 100-pound...

McDaniel Company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct materials and direct labor: Direct Materials (100 lbs. @ $1.00

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd