Question

Amazon stock is currently trading at $3,338 per share. The earnings per share are $23.01 and...

Amazon stock is currently trading at $3,338 per share. The earnings per share are $23.01 and they pay no dividend. If an investor expects 12% return on the shares, what percentage of the share price is derived from the future expected growth?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Formula for Present Value of Growth Opprotunity(PVGO):-

PVGO = Stock Price - (Earnings per share/Cost of Equity)

PVGO = $3,338 - ($23.01/12%)

PVGO = $3146.25

The amount in  the share price that is derived from the future expected growth is $3146.25

Now, Calculating the percentage of the share price is derived from the future expected growth

= PVGO/Current StockPrice

= $3416.25/$3338

= 94.26%

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating       

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
The stock of the MoMi? Corporation is currently trading for $40 per share. The company is...
The stock of the MoMi? Corporation is currently trading for $40 per share. The company is expected to pay dividend of $2 per share at the end of the year. The dividend is expected to grow indefinitely by 6% per year. The risk-free rate of return is 5% and the expected rate of return on the market is 9%. What is the beta of the stock?
Gold Diggers, Inc. has $400,000 shares of common stock currently trading at $45/share. The common stock...
Gold Diggers, Inc. has $400,000 shares of common stock currently trading at $45/share. The common stock of Gold Diggers, Inc is expected to pay a dividend of $2/share next year, and it has a beta calculated at 0.90. It also has 200,000 shares of preferred stock, trading at $50/share. The preferred stock pays dividends of 6%. Finally, Gold Diggers, Inc has 35,0000 bonds currently trading at $910/bond. The coupon rate is 7.5% and the bonds will mature in 12 years....
if a companys stock is currently trading its intrinsic value of $30, the projected earnings per...
if a companys stock is currently trading its intrinsic value of $30, the projected earnings per share is $3.00 and the required rate of return on common stock is 12 percent, what is the present value of growth opportunities
Company A's stock is currently trading at $30 per share. The stock ' is expected to...
Company A's stock is currently trading at $30 per share. The stock ' is expected to pay 2 dollars dividend in year 1, 3 dollars in year 2, X dollars dividend per year for ever after that. The required rate of return on the stock is 10% per year. What is the amount of the dividend X? a) $2.54 b) $3.11 c) $1.50 d) $i.43 e) $1.58
DFB, Inc., expects earnings this year of $5.48 per​ share, and it plans to pay a...
DFB, Inc., expects earnings this year of $5.48 per​ share, and it plans to pay a $3.96 dividend to shareholders. DFB will retain $1.52 per share of its earnings to reinvest in new projects with an expected return of 14.8% per year. Suppose DFB will maintain the same dividend payout​ rate, retention​ rate, and return on new investments in the future and will not change its number of outstanding shares. a. What growth rate of earnings would you forecast for​...
The stock of Nogro Corporation is currently selling for $20 per share. Earnings per share in...
The stock of Nogro Corporation is currently selling for $20 per share. Earnings per share in the coming year are expected to be $6. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 30% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using...
Laurel Enterprises expects earnings next year of $4 per share. The company will pay out all...
Laurel Enterprises expects earnings next year of $4 per share. The company will pay out all of its earnings to investors. Its expected return on new investment (i.e., ROE) is 12%. The required rate of return is 10%. What is the intrinsic value of the stock today? Laurel Enterprises expects earnings next year of $4 per share. The company will retain $2.4 of its earnings to reinvest in new projects that have an expected return of 12% per year (i.e.,...
9. a company pays annual dividends as a percentage of annual earnings per share. Last year...
9. a company pays annual dividends as a percentage of annual earnings per share. Last year the companys stock earned $8.00 per share and the dividend payout ratio was 25%.The company just announced expectations that that earnings are to increase by 48 cents per share in the coming year and that they will keep the payout ratio dividends the same as last year at 25% per share. The company also said that future dividends will grow at the same rate...
Rose Hill Trading Company is expected to have earnings per share in the upcoming year of...
Rose Hill Trading Company is expected to have earnings per share in the upcoming year of $8. The expected ROE is 18%. An appropriate required return on the stock is 14%. The firm has a dividend pay-out ratio of 40%. Required: (4*2.5 = 10pts) A. Calculate the growth rate of the firm.B. What is the intrinsic value of the firm? C. What is the present value of its growth opportunities? D. Calculate the expected dollar dividend payment of the firm...
JKL Corp. has earnings of $1.38 per share. MNO Corp. is a close competitor, with $1.59...
JKL Corp. has earnings of $1.38 per share. MNO Corp. is a close competitor, with $1.59 earnings per share. If MNO stock is currently trading at $39.75 and you believe that the stocks are comparable, what would be a reasonable price expectation for JKL stock? A company’s most recent quarterly dividend was $0.25. This dividend is expected to grow by 3% a year. If investors require an 11% annual return on the stock, what should the stock’s price be? Our...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT