Question

The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for...

The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $5.20, all of which was reinvested in the company. The firm’s expected ROE for the next four years is 18% per year, during which time it is  expected to continue to reinvest all of its earnings. Starting in year 5, the firm’s ROE on new investments is expected to fall to 17% per year. GG’s market capitalization rate is 17% per year.

a. What is your estimate of GG’s intrinsic value per share? (Round your answer to 2 decimal places.)

b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for...
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $6.40, all of which was reinvested in the company. The firm’s expected ROE for the next four years is 21% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm’s ROE on new investments is expected to fall to 20% per year. GG’s market...
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for...
The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $7.0, all of which was reinvested in the company. The firm’s expected ROE for the next four years is 27% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm’s ROE on new investments is expected to fall to 26% per year. GG’s market...
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected...
The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $11.50, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 20% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to 15%, and...
Problem 18-17 The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is...
Problem 18-17 The Digital Electronic Quotation System (DEQS) Corporation pays no cash dividends currently and is not expected to for the next five years. Its latest EPS was $19.00, all of which was reinvested in the company. The firm’s expected ROE for the next five years is 17% per year, and during this time it is expected to continue to reinvest all of its earnings. Starting in year 6, the firm’s ROE on new investments is expected to fall to...
Dividends discount model: The MBS Corporation’s dividends per share are expected to grow indefinitely by 5%...
Dividends discount model: The MBS Corporation’s dividends per share are expected to grow indefinitely by 5% per year. DDa.       If this year-end dividend is $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM (Dividends Discounting Model)? DDb.      If the expected earnings per share are 12$, what is the implied value of the ROE on future investment opportunities? DDc.       How much is the market paying per share for growth opportunities (i.e., for...
The risk-free rate of return is 8%, the expected rate of return on the market portfolio...
The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyong Corporation has a beta of 1.2. Xyong pays out 40% of its earnings in dividends, and the latest earnings announced were $10 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyong will earn an ROE of 20% per year on all reinvested earnings forever. If the market price of...
Flyers, Inc., reported an EPS of $4.6 this year (t0). Flyers is expected to maintain a...
Flyers, Inc., reported an EPS of $4.6 this year (t0). Flyers is expected to maintain a retained earnings ratio of 0.5 and ROE of 0.18 for the next four years. After the fourth year, ROE is expected to decrease to 0.05. Applying the cost of equity of 0.11 and the multi-stage growth model, compute the intrinsic price of Flyers.
Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year’s...
Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year’s earnings are forecasted at $70 million. There are 10 million outstanding shares. The company has traditionally paid out 50% of earnings by repurchases and reinvested the remaining earnings. With reinvestment, the company has generated steady growth averaging 5% per year. Assume the cost of equity is 16%. a. Calculate Surf & Turf ’s current stock price, using the constant-growth DCF model. (Hint: Take the...
Flyers, Inc., reported an EPS of $5.1 this year (t0). Flyers is expected to maintain a...
Flyers, Inc., reported an EPS of $5.1 this year (t0). Flyers is expected to maintain a retained earnings ratio of 0.3 and ROE of 0.18 for the next four years. After the fourth year, ROE is expected to decrease to 0.06. Applying the cost of equity of 0.15 and the multi-stage growth model, compute the intrinsic price of Flyers. *Round your answer to TWO decimal places.
Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its...
Company Z-prime’s earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year’s dividend is $9, the market capitalization rate is 9% and next year’s EPS is $14. What is Z-prime’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT