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
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
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