A company had $21 of sales per share for the year that just ended. You expect the company to grow their sales at 5.75 percent for the next five years. After that, you expect the company to grow 3.25 percent in perpetuity. The company has a 15 percent ROE and you expect that to continue forever. The company's net margins are 5 percent and the cost of equity is 10 percent. Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.

A company had $21 of sales per share for the year that just ended. You expect the company to grow their sales at 5.75 percent for the next five years. After that, you expect the company to grow 3.25 percent in perpetuity. The company has a 15 percent ROE and you expect that to continue forever. The company's net margins are 5 percent and the cost of equity is 10 percent. Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.

Name: A company had $21 of sales per share for the year that just ended. Yo
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Description: A company had $21 of sales per share for the year that just ended. You expect the company to grow their sales at 5.75 percent for the next five years. After that, you expect the company to grow3.25 percent in perpetuity. The company has a 15 percent

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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A company had $15 of sales per share for the year that just ended. You expect the company to grow their sales at 7 percent for the next five years. After that, you expect the company to grow 5 percent in perpetuity. The company has a 15 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 10 percent. Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent. $ 24.65
CX Enterprises has the following expected dividends: $1.04 in one year, $1.22 in two years, and $1.34 in three years. After that, its dividends are expected to grow at 3.5% per year forever (so that year 4's dividend will be 3.5% more than $1.34 and so on). If CX's equity cost of capital is 11.8%, what is the current price of its stock? The price of the stock will be $0. (Round to the nearest cent.)
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 free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.
Boston Company has just paid dividends of $2.5 per share, which the company projects will grow at a constant rate of 5 percent forever. If Boston Company’s shareholders require 15 percent rate of return, what is the price of its common stock? Can you show the excel formula?
Bob's Rawhide Company has a dividend payout ratio of 45%. Next year it will earn $0.75 per share and have a return on equity of 12%. The shareholders' required return is 8%. Calculate the company's growth rate of EPS. Using the earnings model, what is the value of the stock? Construct a data table that shows how the growth rate and value of the stock will change if the ROE ranges between 10% and 20%, in 1% increments. Now, using that data, create a scatter chart to show the relationship between the value of the stock and the ROE. Is the relationship linear? At what point does the model break down? Using the constant-growth model, what is the value of the stock?
CX Enterprises has the following expected dividends: $1.03 in one year, $1.18 in two years, and $1.25 in three years. After that, its dividends are expected to grow at 4.4% per year forever (so that year 4's dividend will be 4.4% more than $1.25 and so on). If CX's equity cost of capital is 11.6%, what is the current price of its stock? The price of the stock will be $. (Round to the nearest cent.) C
Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the company’s outstanding bonds is 7.75%, its tax rate is 25%, the next expected dividend is $0.65 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $14.00 per share, the flotation cost for selling new shares is F = 10%, and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget? 9.96% 7.98% 10.12% 8.75% 8.23%
A company just paid a $1.60 per share annual dividend. The company is planning on paying $1.80, $1.95, $2.05, and $2.20 a share over the next 4 years, respectively. After that, the dividend will be a constant $2.25 per share per year. What is this stock worth to you per share if you require a 8.50% rate of return? Options $24.97 $25.61 $26.25 $26.89 $27.53
2. Intel just paid an annual dividend of $2 a share. Management estimates the dividend will increase by 10 percent a year for the next two years. After that, the dividend growth rate is estimated at 5 percent. The required rate of return is 12 percent. What is the value of this stock today?
NHL Inc.’s current return on equity (ROE) is 20%, its current book equity per share is $50, and it pays out half of its earnings as dividends. Both the ROE and payout ratio will stay constant for the next two years. After year 2, competition will force ROE down to 8%, and NHL will increase its payout ratio to 75%. The cost of capital is 10%. What is NHL’s stock price today?
You anticipate that Liebendauer Enterprises (ticker: LBE) will have earnings per share of $3 this year. Furthermore, you expect that they will pay out $2.25 of these earnings to shareholders in the form of a dividend at the end of this year. You estimate that LBE's return on new investments is 16% and their equity cost of capital is 13%. Your expected growth rate for LBE's dividends will be closest to: OA. 4% OB. 3.3% OC. 1.6% OD. 2.4%
How much are you willing to pay for one share of Delphia stock if the company just paid a $1.43 annual dividend last year, the dividends increase by 4 percent annually, and you require a 14 percent rate of return?

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