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

Analysis of stockholders'' equity , Analysis of stockholders equity: S...

Analysis of stockholders equity: Star Corporation issued both common and preferred stock during 19X6. The stockholders' equity sections of the company's balance sheets at the

Costs of the service departments, Bull Bay Ltd. Manufacturers two types of ...

Bull Bay Ltd. Manufacturers two types of surfboard, "Winner" and "Surf King", whose selling prices are $300 and $900 respectively. Each surfboard passes through two manufacturing d

Is there barely one way to conduct fca, Q. Is there barely one way to condu...

Q. Is there barely one way to conduct fca? Ans. No. It is significant for each area to put the FCA process in perception with its waste management goals. Every community w

Prepare the purchases ledger control account, You work for a firm of accoun...

You work for a firm of accountants as a junior accounts assistant and part of your role is to prepare clients' ledgers accounts from incomplete records. A client of the firm you

Share capital of a company, A company has an authorized share capital of 25...

A company has an authorized share capital of 250 million divided into 1,500,000 ordinary shares of sh.100 each and 1,000,000 preference shares of sh.100 each. 1,000,000 ordinary sh

What is callable preferred stock, What is callable preferred stock? Why do ...

What is callable preferred stock? Why do corporations issue such stock? Given the different features that are associated with stock (callable, cumulative, preferred, etc.), what ty

Overhead anaylsis sheet, how do we prepare an overhead analysis sheet when ...

how do we prepare an overhead analysis sheet when the data given is already apportioned

Ms, Goga Ltd is busy building a five-star hotel in the area, they use the p...

Goga Ltd is busy building a five-star hotel in the area, they use the percentage of completion method to determine profits and would like to calculate the profit for the year. dra

Economic order quantity, Economic Order Quantity This constitutes the...

Economic Order Quantity This constitutes the quantity purchased of either raw materials or stocks which is considered most optimum. It is the quantity such minimizes both ord

Activity Based Costing, How do I figure the estimated activity and estimate...

How do I figure the estimated activity and estimated allocation base?

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