Question

Joker stock has a sustainable growth rate of 9 percent, ROE of 17 percent, and dividends...

Joker stock has a sustainable growth rate of 9 percent, ROE of 17 percent, and dividends per share of $1.55. If the P/E ratio is 15.5, what is the value of a share of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Share of stock $________

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Step-1, Calculation of the Retention Ratio

Sustainable Growth Rate = ROE x Retention ratio

0.09 = 0.17 x Retention Ratio

Retention Ratio = 0.09 / 0.17

Retention ratio = 0.5294 or 52.94%

Step-2, Calculation of the Dividend Payout Ratio

Dividend Payout Ratio = 1 – Retention Ratio

= 1 – 0.5294

= 0.4706 or 47.06%

Step-3, Calculation of the Earnings Per Share (EPS)

Dividend Payout Ratio = Dividend per share / Earnings Per Share

0.4706 = $1.55 / Earnings Per Share

Earnings Per Share = $1.55 / 0.4706

Earnings Per Share = $3.2937 per share

Step-4, Calculation of the Price of the Stock

The Value of a Stock = Earnings per share x P/E Ratio

= $3.2937 per share x 15.5 Times

= $51.05 per share

“Hence, the Value of a Stock would be $51.05”

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Joker stock has a sustainable growth rate of 7 percent, ROE of 16 percent, and dividends...
Joker stock has a sustainable growth rate of 7 percent, ROE of 16 percent, and dividends per share of $3.40. If the P/E ratio is 19.7, what is the value of a share of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)   Share of stock $ __________
Joker stock has a sustainable growth rate of 11 percent, ROE of 17 percent, and dividends...
Joker stock has a sustainable growth rate of 11 percent, ROE of 17 percent, and dividends per share of $3.25. If the P/E ratio is 16.7, what is the value of a share of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock value per share?
Talcville Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends...
Talcville Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 5.5% per year indefinitely. Investors require a 15.5% return on the stock for the first three years, a 13.5% return for the next three years, and an 11.5% return thereafter. What is the current share price? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
Talcville Farms just paid a dividend of $3.46 on its stock. The growth rate in dividends...
Talcville Farms just paid a dividend of $3.46 on its stock. The growth rate in dividends is expected to be a constant 6.3% per year indefinitely. Investors require a 16.3% return on the stock for the first three years, a 14.3% return for the next three years, and an 12.3% return thereafter. What is the current share price? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current share price...
The Wintergrass Company has an ROE of 13.6 percent and a payout ratio of 30 percent....
The Wintergrass Company has an ROE of 13.6 percent and a payout ratio of 30 percent.    What is the company’s sustainable growth rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Q1. Johnson Products earned $2.80 per share last year and paid a $1.25 per share dividend....
Q1. Johnson Products earned $2.80 per share last year and paid a $1.25 per share dividend. If ROE was 14 percent, what is the sustainable growth rate? Q2. Joker stock has a sustainable growth rate of 8 percent, ROE of 14 percent, and dividends per share of $1.65. If the P/E ratio is 19, what is the value of a share of stock?
High Flyer, Inc., wishes to maintain a growth rate of 15.75 percent per year and a...
High Flyer, Inc., wishes to maintain a growth rate of 15.75 percent per year and a debt–equity ratio of .85. The profit margin is 4.9 percent, and total asset turnover is constant at 1.09.    What is the dividend payout ratio? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)    Dividend payout ratio             %    What is the maximum...
Problem 4-22 Sustainable Growth Rate [LO3] Cambria, Inc., had equity of $175,000 at the beginning of...
Problem 4-22 Sustainable Growth Rate [LO3] Cambria, Inc., had equity of $175,000 at the beginning of the year. At the end of the year, the company had total assets of $330,000. During the year the company sold no new equity. Net income for the year was $37,000 and dividends were $5,000. What is the sustainable growth rate for the company? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Sustainable growth rate %...
Sustainable Growth Rate Late year Umbrellas Unlimited Corporation had an ROE of 17% and a dividend...
Sustainable Growth Rate Late year Umbrellas Unlimited Corporation had an ROE of 17% and a dividend payout ratio of 39.5%. What is the sustainable growth rate?
Could I Industries just paid a dividend of $1.82 per share. The dividends are expected to...
Could I Industries just paid a dividend of $1.82 per share. The dividends are expected to grow at a 16 percent rate for the next 4 years and then level off to a 4 percent growth rate indefinitely. If the required return is 15 percent, what is the value of the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Price $______
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT