Question

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

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Homework Answers

Answer #1

current stock price can be calculated using the following formula :-

= D1 / Re- g

d1 = divident in year 1

Re = required rate of return

g = growth rate

we can caalculate the EPS as follows :-

EPS = net income / shares outstanding

= 16 / 7 = 2.2857

divident in year 0 = 2.2857*80% = 1.82856

divident in year 1 = 1.82856*1.03 = 1.8834

current stock price   = 1.8834 / 0.09- 0.03

current stock price = $ 31.39

.........................Hope you are satsfied with the solution, kindly support by rating the answer....................

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