Question

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

Answer #1

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.,...

A.
Growth and Value A firm has projected earnings
of $6 per share for next year and has a 30% dividend payout ratio.
The firm's required return is 13%. The firm's ROE is 14%. What is
the intrinsic value of the stock?
$56.25
$54.33
$50.77
$49.65
B.
Value of Growth Opportunities A firm has
projected annual earnings per share of $4.00 and a dividend payout
ratio of 60%. The firm's required return is 11% and dividends and
earnings are expected...

Rose Hill Trading Company is expected to have earnings per share
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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 company's earnings per share and dividend growth
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first 3 years: 12%/year
after: 9%/year
they pay a dividend if 1.72$ / share recently. the rate of return
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1) estimate intrinsic value of a share. how much can
be attributed to extraordinary growth? how about stable growth?

Bell Beauty Company plc has just paid its annual
dividend of $6.00 per share. It has been consistently paying out 30
percent of its earnings in dividends. The beta of the stock of the
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is 4.0%.
(i) Estimate the return to stock and estimate its
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(ii) Estimate the intrinsic value P of the stock
assuming that the dividend growth
you estimated in (i) can...

Suppose that the consensus forecast of security analysts of
NoWork Inc. is that earnings next year will be E1 = $5.00 per
share. The company tends to plow back 60% of its earnings and pay
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rate will be 8% from now on.
(a) If your estimate of the company’s required rate of return is
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(b) Suppose you observe that the...

5.5 Firm X is priced at $10 per share. Expected dividend next
year is $1 per share, and the expected stock price next year is
$11. Therefore, stock is expected to earn (11 + 1 – 10)/10 = 20%.
This implies that the company has required rate of return that is
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a. Retention ratio
b. Dividend payout
c....

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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
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a. Assuming the current market price of the stock
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RNN Ltd’s earnings per share next year is expected to be $2.00
and the earnings are expected to grow at 5% p.a. for the
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Group of answer choices $15.00 $16.70. $41.70. $25.00.

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