ABC Technologies has been growing quite rapidly in recent years and has a growth potential of 27% from today till the end of year 3. Analysts estimate that the growth rate will decrease to 24% in year 4 and 5 after which it will stabilize at 10% thereafter. If the ROE is expected to remain constant at 30% annually, and the current Earning Per Share is S1.4, calculate the value of this stock. (Assume that shareholders require a 12% rate of return, Round off calculations to 2 decimal spaces).
ABC Technologies has been growing quite rapidly in recent years and has a growth potential of 27% from today till the end of year 3. Analysts estimate that the growth rate will decrease to 24% in year 4 and 5 after which it will stabilize at 10% thereafter. If the ROE is expected to remain constant at 30% annually, and the current Earning Per Share is S1.4, calculate the value of this stock. (Assume that shareholders require a 12% rate of return, Round off calculations to 2 decimal spaces).
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
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Transcribed Image Text:ABC Technologies has been growing quite rapidly in recent years and has a growth potential of 27%
from today till the end of year 3. Analysts estimate that the growth rate will decrease to 24% in year
4 and 5 after which it will stabilize at 10% thereafter. If the ROE is expected to remain constant at
30% annually, and the current Earning Per Share is S1.4, calculate the value of this stock. (Assume
that shareholders require a 12% rate of return, Round off calculations to 2 decimal spaces).
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