4. Prenda Inc. reported a net income of P750,000. The company has 250,000 shares of common stock and it is currently trades at P45 per share. The company continue to expand and anticipates that one year from now, its net income will be P1,250,000. Over the year, the company anticipates issuing additional 100,000 shares of stock, so that one year from now the company will have 350,000 shares of commons stock. Assuming the company’s price/earnings ratio remain at its current level, what will be the company’s stock price one year from now? 5. You are considering the purchase of Pasaha Company stock. You anticipate that the company will pay dividend of P2.25 per share next year and P2.50 per share the following year. You believe that you can sell the stock for P18.50 per share two years from now. If your required rate of return is 12.5%, what is the maximum price you would pay for a share?   6. You are considering to purchase of Havana Company Stocks. The firm has just paid a dividend of P5.50 per share. The stock is selling for P125 per share. Top management is projecting a steady growth of 10% in dividends and earnings over the foreseable future. Your required rate of return for stock of this kind is 18%. If you were to purchase and hold the stock for 3 years, What would be the expected dividends worth today. Please answer with solution.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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4. Prenda Inc. reported a net income of P750,000. The company has 250,000 shares of common stock and it is currently trades at P45 per share. The company continue to expand and anticipates that one year from now, its net income will be P1,250,000. Over the year, the company anticipates issuing additional 100,000 shares of stock, so that one year from now the company will have 350,000 shares of commons stock. Assuming the company’s price/earnings ratio remain at its current level, what will be the company’s stock price one year from now?

5. You are considering the purchase of Pasaha Company stock. You anticipate that the company will pay dividend of P2.25 per share next year and P2.50 per share the following year. You believe that you can sell the stock for P18.50 per share two years from now. If your required rate of return is 12.5%, what is the maximum price you would pay for a share?

 

6. You are considering to purchase of Havana Company Stocks. The firm has just paid a dividend of P5.50 per share. The stock is selling for P125 per share. Top management is projecting a steady growth of 10% in dividends and earnings over the foreseable future. Your required rate of return for stock of this kind is 18%. If you were to purchase and hold the stock for 3 years, What would be the expected dividends worth today.

Please answer with solution.

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