Question

16) Firm TUV expects to earn $6 per share next year. In the next three years, the firm’s ROE is expected to be 12%, 15%, 18%, respectively, and its dividend payout ratio is 90%. After that, the firm's ROE is expected to increase to 25%, and the firm will set the dividend payout ratio = 60%. Assume that the discount rate is 20%. Find the stock price

Answer #1

Sisters Corp. expects to earn $6 per share next year. The firm’s
ROE is 16% and its plowback ratio is 60%. If the firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant dividend
growth model. (Do not round intermediate
calculations.)
b. Calculate the price with no growth.
c. What is the present value of its growth
opportunities? (Do not round intermediate
calculations.)

Sisters Corp. expects to earn $6 per share next year. The firm’s
ROE is 15% and its plowback ratio is 60%. The firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant
dividend growth model.
b. Calculate the price with no growth.
c. What is the present value of its growth opportunities?

Sisters Corp expects to earn $6 per share next year. The firm’s
ROE is 15% and its plowback ratio is 60%. If the firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant dividend growth
model.
b. Calculate the price with no growth.
c. What is the present value of its growth opportunities?

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...

Hosmer Enterprises expects to earn $4 per share next year. The
firm’s ROE is 10% and its’ plowback ratio is 60%. If the firm’s
market capitalization rate is 8%:
Calculate the price if Hosmer Enterprises pays all of its earnings
out as a dividend.

Brothers Corp expects to earn $6 per share next year. The firm’s
ROE is 15% and its plowback ratio is 50%. If the firm’s market
capitalization rate is 13%, what is the present value of its growth
opportunities?

Sisters Corp expects to earn $8 per share next year. The firm’s
ROE is 10% and its plowback ratio is 60%. If the firm’s market
capitalization rate is 8%.
a. Calculate the price with the constant
dividend growth model. (Do not round intermediate
calculations.)
Price
$
100
b. Calculate the price with no growth.
Price
$
c. What is the present value of its growth
opportunities? (Do not round intermediate
calculations.)
PVGO
$

HMW # 2 Chapter 13
Sisters Corp expects to earn $7 per share next year. The firm’s
ROE is 15% and its plowback ratio is 50%. If the firm’s market
capitalization rate is 10%.
a. Calculate the price with the constant
dividend growth model. (Do not round intermediate
calculations.)
Price
$
b. Calculate the price with no growth.
Price
$
c. What is the present value of its growth
opportunities? (Do not round intermediate
calculations.)
PVGO
$

Trahern Baking Co. common stock sells for $33.45 per share. It
expects to earn $3.00 per share during the current year, its
expected dividend payout ratio is 60%, and its expected constant
dividend growth rate is 6.0%. New stock can be sold to the public
at the current price, but a flotation cost of 4.5% would be
incurred. What would be the cost of equity from new common stock?
19.57% 21.08% 21.70% 15.78% 14.05%

LePage Co. expects to earn $2.50 per share during the current
year, its expected dividend payout ratio is 65%, its expected
constant dividend growth rate is 6.0%, and its common stock
currently sells for $24.75 per share. New stock can be sold to the
public at the current price, but a flotation cost of 9% would be
incurred. What would be the cost of equity from new common
stock?

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