A Residual Earnings Valuation (Easy)An analyst presents you with the following pro forma (in millions of dollars) that gives herforecast of earnings and dividends for 2013-2017. She asks you to value the 1,380 millionshares outstanding at the end of 2012, when common shareholders' equity stood at $4,310million. Use a required return for equity of 10 percent in your calculations.EarningsDividends2013E388.0115.02014E570.0160.02015E599.0349.02016E629.0367.02017E660.4385.4Chapter 5 Accrual Accounting and Valuation: Pricing Book Values 169a. Forecast book value, return on common equity (ROCE), and residual earnings for eachof the years 2013-2017.b. Forecast growth rates for book value and residual earnings for each of the years2014-2017.c. Calculate the per-share value of the equity from this pro forma. Would you call this aCase 1, 2, or 3 valuation?d. What is the premium over book value given by your calculation? What is the P/B ratio?

We have to first calculate the equity charge which is the cost of capital ( required rate of return…

Answered: A Residual Earnings Valuation (Easy) An…

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

See similar textbooks

Similar questions

Integrative Risk and valuation Giant Enterprises' stock has a required return of 13.9%. The company, which plans to pay a dividend of $2.01 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over 2013-2019 period, when the following dividends were paid: a. If the risk-free rate is 3%, what is the risk premium on Giant's stock? b. Using the constant-growth model, estimate the value of Giant's stock. (Hint: Round the computed dividend growth rate to the nearest whole percent.) c. Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock. a. If the risk-free rate is 3%, the risk premium on Giant's stock is %. (Round to one decimal place.)
Faux Corp Stock Over the Last 10 years - Beta = 1.1 - Market Risk premium = 10% - Current risk-free rate 3% - Last dividend $5 - Current Stock Price $30 Dividend History 2016 - $4.20 2017 - $4.40 2018 - $4.55 2019 - $4.75 2020 - $5.00 1. Calculate the cost of equity using SML
Given the information below for Seger Corporation, compute the expected share price at the end of 2022 using price ratio analysis. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year Price EPS CFPS SPS 2016 $61.10 Using PE ratio Using P/CF ratio Using P/S ratio 3.35 8.12 31.20 2017 $67.00 4.06 8.92 36.20 $ $ 2018 $ 65.70 4.86 9.22 35.60 Share Price 0.17 0.11 2019 2020 $ 63.20 $ 84.70 5.56 7.85 10.97 12.31 39.10 50.30 2021 $100.10 8.85 13.44 58.30
Hello tutor I want answer of this Question and I want this in text Format.
In the beginning of January 2023 you want to estimate the value of a stock. On December 31 2022 the price of the stock was $63.5 and you believe that the annual dividend growth rate and stock price growth rate will be 7% for the years 2023, 2024 and 2025. The dividend of 2022 will be paid in 2023 and will be S 1.48. The discount rate is 11.5%. Calculate the price of the stock and say if it is over or undervalued
Use the historical dividend data below to calculate the constant growth rate, estimate the price of O'Brien Ltds’ common stock knowing that the investor has an 19% required rate of return. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $0.41 $0.48 $0.56 $0.65 $0.75 $0.88 $0.99 $1.10 $1.13 $1.39 Question 10Answer a. g= 17.50% and Price (P0) = $56.43 b. g= 14.04% and Price (P0) = $31.49 c. g= 27.4% and Price (P0) = $300.81 d. g= 14.53% and Price (P0) = $35.60
Roundall dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percentrounded to one decimal place. 26. The historical stock returns for GAF, Inc. are listed below: Year -Annual Stock Return2013 -12%2014 14%2015 35%2016 2%2017 -16%2018 8%2019 0%2020 34%2021 12%2022 6% What is the standard deviation of returns for GAF, Inc. stock over the 10-year time period? (Compute the standard deviation assuming this is a population of returns, not a sample – that is, use the procedure describedin the textbook for calculating the standard deviation of a series of stock returns).27. The end of year stock price and the dividend paid each year for Maxwell, Inc. stock for years 0 through 6 arelisted in the table below: Year -End of Year Stock Price- Dividend0 $12.00 $ 01 $14.86 $1.802 $7.95 $1.883 $8.00…
Integrative Risk and valuation Giant Enterprises' stock has a required return of 14.8%. The company, which plans to pay a dividend of $2.93 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over 2013-2019 period, when the following dividends were paid: a. If the risk-free rate is 5%, what is the risk premium on Giant's stock? b. Using the constant-growth model, estimate the value of Giant's stock. (Hint: Round the computed dividend growth rate to the nearest whole percent.) c. Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock. a. If the risk-free rate is 5%, the risk premium on Giant's stock is%. (Round to one decimal place.) C
Calculate today's stock price, based on the following information: Growth rate of dividends years 1 and 2 = 20% Growth rate of dividends years 3 and 4 = 15% Growth rate of dividends year 5 moving forward = 5% Last dividend paid = $1.00 Required rate of return based on the riskiness of this stock = 12% (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Do not input a c Numeric Response
Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $1.70 and it expects dividends to grow at a constant rate gL = 5%. The firm's current common stock price, P0, is $23.60. If it needs to issue new common stock, the firm will encounter a 5.7% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. What is the flotation cost adjustment that must be added to its cost of retained earnings? Round your answer to 2 decimal places. Do not round intermediate calculations. % What is the cost of new common equity? Round your answer to 2 decimal places. Do not round intermediate calculations. %
4. Kindly answer
Integrative-Risk and valuation Giant Enterprises' stock has a required return of 14.2%. The company, which plans to pay a dividend of $1.84 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over 2013-2019 period, when the following dividends were paid: E. a. If the risk-free rate is 6%, what is the risk premium on Giant's stock? b. Using the constant-growth model, estimate the value of Giant's stock. (Hint: Round the computed dividend growth rate to the nearest whole percent.) c. Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock. a. If the risk-free rate is 6%, the risk premium on Giant's stock is %. (Round to one decimal place.) b. Using the constant-growth model, the value of Giant's stock is $ . (Round to the nearest cent.) c. Explain what effect, if any, a decrease in the risk premium would have on the value of Giant's stock. (Select from the…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS