Question

GHL, Inc., has a dividend payout ratio of 55%. Its cost of equity is 10.7% and...

GHL, Inc., has a dividend payout ratio of 55%. Its cost of equity is 10.7% and its dividend growth rate is 5.2%. If its forward EPS is $5.67​, what is your estimate of its stock​ price?

The price per share is ​$_.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Given,

Dividend payout ratio = 55%

Cost of equity = 10.7% or 0.107

Dividend growth rate = 5.2% or 0.052

Forward EPS = $5.67

Solution :-

Expected dividend = Forward EPS x dividend payout ratio

= $5.67 x 55% = $3.1185

Price per share = Expected dividend (cost of equity - dividend growth rate)

= $3.1185 (0.107 - 0.052)

= $3.1185 0.055 = $56.70

The price per share is $56.70

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
Colgate-Palmolive Company has just paid an annual dividend of $1.06. Analysts are predicting an 10.7% per...
Colgate-Palmolive Company has just paid an annual dividend of $1.06. Analysts are predicting an 10.7% per year growth rate in earnings over the next five years. After​ that, Colgate's earnings are expected to grow at the current industry average of 5.3% per year. If​ Colgate's equity cost of capital is 9.4% per year and its dividend payout ratio remains​ constant, for what price does the DDM predict Colgate stock should​ sell?
WACC AND COST OF COMMON EQUITY Kahn Inc. has a target capital structure of 55% common...
WACC AND COST OF COMMON EQUITY Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt of 10%, and a tax rate of 40%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $4, and the current stock price is $28....
Assume that the Vana Inc. Corporation’s expected earnings per share (E1) are $12, its dividend payout...
Assume that the Vana Inc. Corporation’s expected earnings per share (E1) are $12, its dividend payout ratio is 70%, and its return on equity (ROE) is 20%. The investors’ required rate of return (k) on the stock is 10% per year. What is the company’s present value of growth opportunity (PVGO)? ******PLEASE SHOW WORK
LePage Co. expects to earn $2.50 per share during the current year, its expected dividend payout...
LePage Co. expects to earn $2.50 per share during the current year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $24.75 per share. New stock can be sold to the public at the current price, but a flotation cost of 9% would be incurred. What would be the cost of equity from new common stock?
Yasheen Company expects to earn $3.50 per share during the current year, its expected dividend payout...
Yasheen Company expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 66%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock? a. 13.37% b. 13.70% c. 13.98% d. 13.74% e. 13.48%
Rampart Corporation has a dividend yield of 1.8 %. Its equity cost of capital is 8.8...
Rampart Corporation has a dividend yield of 1.8 %. Its equity cost of capital is 8.8 %​, and its dividends are expected to grow at a constant rate. a. The growth rate will be nothing​%. ​(Round to one decimal​ place.) b. What is the expected growth rate of​ Rampart's share​ price? ​(Select the best choice​ below.) A. With constant dividend​ growth, share price is also expected to grow at rate g = 1.8 %. B. With constant dividend​ growth, share...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 14%, a before-tax cost of debt of 12%, and a tax rate of 40%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $2, and the current stock price is $23. What is the company's expected growth...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $9 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt of 10%, and a tax rate of 40%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $2, and the current stock price is $21. What is the company's expected growth...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund...
Kahn Inc. has a target capital structure of 55% common equity and 45% debt to fund its $9 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before-tax cost of debt of 10%, and a tax rate of 40%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $2, and the current stock price is $21. What is the company's expected growth...
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund...
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 9%, and a tax rate of 40%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3, and the current stock price is $23. What is the company's expected growth...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT