Below you can find the relevant financial information for Bristol Investments PLC during the latest financial year: Name: Bristol Investments PLC Capital Structure: all equity finance Earnings per Share (EPS): £4.5 Standard deviation of Returns: 25% Covariance with Market Portfolio: 0.026 The firm has just paid out its last dividend. The market portfolio has an expected return of 13% and an annual standard deviation of 23%. The annual risk-free rate is 5.5%. Assume that the expected returns are explained by the Capital Asset Pricing Model (CAPM). The firm’s expected growth in earnings per share is constantly at 2.2% and pays out all its earnings as dividends on an annual basis. Question: What is the required rate of return for Bristol Investments PLC?
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Below you can find the relevant financial information for Bristol Investments PLC during the latest financial year:
Name: Bristol Investments PLC
Capital Structure: all equity finance
Earnings per Share (EPS): £4.5
Standard deviation of Returns: 25%
Covariance with Market Portfolio: 0.026
The firm has just paid out its last dividend. The market portfolio has an expected return of 13% and an annual standard deviation of 23%. The annual risk-free rate is 5.5%. Assume that the expected returns are explained by the
Question: What is the required rate of
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