Question

6: Pro Build Inc. has had a net income of $16 million in its most recent...

6: Pro Build Inc. has had a net income of $16 million in its most recent year. Net income is expected to grow by 3% per year. The firm always pays out 10% of net income as dividends and has 7 million shares of common stock outstanding. The required return is 13%.

What is the current stock price?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution>

Net Income = $ 16 Million

Dividend Payout ratio = 10%

Cost of Equity = 13%

Dividend paid = $ 16,000,000 * 0.10 = $ 1,600,000

No of Shares outstanding = $ 7,000,000

Dividend per share = $ 1,600,000/$ 7,000,000= $ 0.2286

Growth rate = 3%

Since the dividend pay out is a constant 10% of earnings, dividends also grow at 3%

Next year Dividend = $ 0.2286 * 1.03 = $ 0.2354

Current Stock Price = $ 0.2354 /(0.13 – 0.03) = $ 2.354

Note: Give it a thumbs up if it helps! Thanks in advance!

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Pro Build Inc. has had a net income of $16 million in its most recent year....
Pro Build Inc. has had a net income of $16 million in its most recent year. Net income is expected to grow by 3% per year. The firm always pays out 80% of net income as dividends and has 7 million shares of common stock outstanding. The required return is 9%.   Attempt 1/3 for 8 pts. Part 1 What is the current stock price? please the answer fast
Suppose a firm has a retention ratio of 15 percent, net income of $60 million, and...
Suppose a firm has a retention ratio of 15 percent, net income of $60 million, and 15 million shares outstanding. What would be the dividend per share paid out on the firm's stock? Candy Town, Inc. normally pays a annual dividend. The last such dividend paid was $2.00, all future annual dividends are expected to grow at 10 percent, and the firm faces a required rate of return on equity of 15 percent. If the firm just announced that the...
In its most recent financial statements, Del-Castillo Inc. reported $50 million of net income and $870...
In its most recent financial statements, Del-Castillo Inc. reported $50 million of net income and $870 million of retained earnings. The previous retained earnings were $853 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
In its most recent financial statements, Del-Castillo Inc. reported $50 million of net income and $870...
In its most recent financial statements, Del-Castillo Inc. reported $50 million of net income and $870 million of retained earnings. The previous retained earnings were $853 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
In its most recent financial statements, Del-Castillo Inc. reported $50 million of net income and $870...
In its most recent financial statements, Del-Castillo Inc. reported $50 million of net income and $870 million of retained earnings. The previous retained earnings were $860 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
In its most recent financial statements, Nessler Inc. reported $20 million of net income and $220...
In its most recent financial statements, Nessler Inc. reported $20 million of net income and $220 million of retained earnings. The previous retained earnings were $211 million. How much in dividends were paid to shareholders during the year? Assume that all dividends declared were actually paid. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary.
In its most recent financial statements, Nessler Inc. reported $20 million of net income and $260...
In its most recent financial statements, Nessler Inc. reported $20 million of net income and $260 million of retained earnings. The previous retained earnings were $250 million. How much in dividends were paid to shareholders during the year? Assume that all dividends declared were actually paid. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary.
For the most recent year, Seether, Inc., had sales of $447,000, cost of goods sold of...
For the most recent year, Seether, Inc., had sales of $447,000, cost of goods sold of $218,400, depreciation expense of $58,100, and additions to retained earnings of $50,300. The firm currently has 32,000 shares of common stock outstanding, and the previous year’s dividends per share were $1.35.    Assuming a 30 percent income tax rate, what was the times interest earned ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)    Times interest...
Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was $1...
Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 25%. At year-end, it had $14 million in operating current assets, $3 million in accounts payable, $1 million in accruals, $2 million in notes payable, and $15 million in net plant and equipment. Assume Miami Rivet has no excess cash. Miami Rivet uses only debt and common equity to fund its...
Maxwell Electronics had net income of $21 million last year, and had 3 million common shares...
Maxwell Electronics had net income of $21 million last year, and had 3 million common shares outstanding. They declared a 12% stock dividend. Calculate EPS before and after the stock dividend.   
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT