A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.75 percent for the next five years. After that, you expect the company to grow 3.75 percent in perpetuity. The company has a 14 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the

A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.75 percent for the next five years. After that, you expect the company to grow 3.75 percent in perpetuity. The company has a 14 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the

Name: A company had $20 of sales per share for the year thatjust ended. You
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Description: A company had $20 of sales per share for the year thatjust ended. You expect the company to grow their salesat 6.75 percent for the next five years. After that, youexpect the company to grow 3.75 percent in perpetuity.The company has a 14 percent RO

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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An all-equity firm had a dividend expense of $45,000 last year. The market value of the firmis $800,000 and the dividend is expected to increase at 7% each year. What is the cost of the equity for the firm?
Company has expected earnings of $4.8 per share for next year. The firm's ROE is 16%, and its earnings retention ratio is 55%. If the firm's market capitalization rate is 12%, what is the present value of its growth opportunities?
You are valuing a bank. The bank currently has assets of $330 per share. Five years from now (that is, at the end of five years), you expect their assets per share to be $470. After Year 5, you expect their assets per share to grow at 3.25 percent per year forever. The bank has an ROA of 2.0 percent and an ROE of 13.0 percent. The bank's cost of equity is 11.5 percent. What is the value of the bank's stock? Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent. 69
Ocasa Ltd. Just paid a dividend of $6.00 per share next year, and that the dividend will grow at the same rate as its profits. High profits are expected during this period, with the first three years of growth estimated to be 13%, 11% and 10% respectively, before returning to constant long+ term industry growth rate of 6% per year. The firm’s cost of equity is 15%. i. What is the firm’s share price today (P0)? ii. What is the expected share price next year (P1)? iii. Calculate the dividend yield for year 2. iv. Calculate the current capital gains yield (year 1).
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Pearl Corp. is expected to have an EBIT of $2,000,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $85,000, and $125,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $10,500,000 in debt and 850,000 shares outstanding. At Year 5, you believe that the company's sales will be $14,850,000 and the appropriate price-sales ratio is 2.2. The company’s WACC is 8.5 percent and the tax rate is 22 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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