Question

You forecast that Advanced Modem Communications (AMC) will have earnings per share next year (2020) of...

You forecast that Advanced Modem Communications (AMC) will have earnings per share next year (2020) of $3.50, and pays out 60% of earnings as dividends. You estimate that AMC earns a 12% return on new investments. AMC stock currently has a market price of $75.50 per share. You require a return of at least 9% on your investment.

19) Estimate the sustainable growth rate. Closest to: a) 2.8 % b) 3.0 % c) 4.0 % d) 4.8 %

20) Estimate the fair market value (intrinsic value) of this stock using the dividend discount model, assume a constant growth rate of 3.0%. Closest to: a) $ 31 b) $ 35 c) $ 39 d) $ 44

21) Estimate the no-growth value of AMC stock, i.e., the value if dividend payout = 100% of earnings. Closest to: a) $ 31 b) $ 35 c) $ 39 d) $ 44

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