18) You have collected the following information regarding Impi Industrial Corporation's historical earnings per share R 12.36 R 13.60 2012 2013 2014 2015 2016 2017 Based on your analysis of Impi's fundamentals you estimate that the firm's earnings will continue to grow at its average historical growth rate for the next year but that in the following year, as a result of the launch of a new product the firm is currently developing, earnings will grow at a rate of 20% per year for two years. After this, you project that the earnings growth rate will decrease by 5% per year for the next two years, to its long-term sustainable rate. You project that the firm will maintain a 50% dividend pay-out ratio and that the appropriate market capitalisation rate for Impi Industrial Corporation is 15%. What action would you take if the firm's shares are currently trading at R620 per share? R15.82 R 17.80 R 20.90 R21. 78
18) You have collected the following information regarding Impi Industrial Corporation's historical earnings per share R 12.36 R 13.60 2012 2013 2014 2015 2016 2017 Based on your analysis of Impi's fundamentals you estimate that the firm's earnings will continue to grow at its average historical growth rate for the next year but that in the following year, as a result of the launch of a new product the firm is currently developing, earnings will grow at a rate of 20% per year for two years. After this, you project that the earnings growth rate will decrease by 5% per year for the next two years, to its long-term sustainable rate. You project that the firm will maintain a 50% dividend pay-out ratio and that the appropriate market capitalisation rate for Impi Industrial Corporation is 15%. What action would you take if the firm's shares are currently trading at R620 per share? R15.82 R 17.80 R 20.90 R21. 78
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:18) You have collected the following information regarding Impi Industrial Corporation's historical
earnings per share
R 12.36
R 13.60
2012
2013
2014
2015
2016
2017
Based on your analysis of Impi's fundamentals you estimate that the firm's earnings will continue to
grow at its average historical growth rate for the next year but that in the following year, as a result of
the launch of a new product the firm is currently developing, earnings will grow at a rate of 20% per
year for two years. After this, you project that the earnings growth rate will decrease by 5% per year for
the next two years, to its long-term sustainable rate. You project that the firm will maintain a 50%
dividend pay-out ratio and that the appropriate market capitalisation rate for Impi Industrial Corporation
is 15%. What action would you take if the firm's shares are currently trading at R620 per share?
R15.82
R 17.80
R 20.90
R21. 78
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