Suppose that a firm's recent earnings per share and dividend per share are $3.05 and $2.40, respectively. Both are expected to growat 8 percent. However, the firm's current P/E ratio of 25 seems high for this growth rate. The P/E ratio is expected to fall to 21 within fiveyears.Compute the dividends over the next five years. (Do not round Intermediate calculations. Round your answers to 3 decimal places.)FallAnswer is complete and correct.YearsFirst yearSecond yearThird yearFourth yearFifth yearStock price$SPresentvalue$$SDividendsCompute the value of this stock price in five years. (Do not round Intermediate calculations. Round your answer to 2 decimalplaces.)2.5922.7993.0233.2653.526Answer is complete and correct.S94.08Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round Intermediate calculations. Roundyour answer to 2 decimal places.)x Answer is not complete.hso far. It does not Indicate completion.

Price of the stock is the PV of all future dividends and horizon value discounted at the required…

Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Present value Answer is not complete.

Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Present value Answer is not complete.

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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Question

100%

Suppose that a firm's recent earnings per share and dividend per share are $3.05 and $2.40, respectively. Both are expected to grow
at 8 percent. However, the firm's current P/E ratio of 25 seems high for this growth rate. The P/E ratio is expected to fall to 21 within five
years.
Compute the dividends over the next five years. (Do not round Intermediate calculations. Round your answers to 3 decimal places.)
Fall
Answer is complete and correct.
Years
First year
Second year
Third year
Fourth year
Fifth year
Stock price
$
S
Present
value
$
$
S
Dividends
Compute the value of this stock price in five years. (Do not round Intermediate calculations. Round your answer to 2 decimal
places.)
2.592
2.799
3.023
3.265
3.526
Answer is complete and correct.
S
94.08
Calculate the present value of these cash flows using a 10 percent discount rate. (Do not round Intermediate calculations. Round
your answer to 2 decimal places.)
x Answer is not complete.
h
so far. It does not Indicate completion.

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