Company Ts current return on equity (ROE) is 16%. It pays out one-quarter of earnings as cash dividends (payout ratio = .25). Current book value per share is $35. The company has 5 million shares outstanding. Assume that ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 10% and the company increases the payout ratio to 60%. The company does not plan to issue or retire shares. The cost of capital is 9.5%. a.What is stock T worth?
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Company Ts current
cash dividends (payout ratio = .25). Current book value per share is $35. The company has
5 million shares outstanding.
Assume that ROE and payout ratio stay constant for the next four years. After that,
competition forces ROE down to 10% and the company increases the payout ratio to 60%.
The company does not plan to issue or retire shares. The cost of capital is 9.5%.
a.What is stock T worth?
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- Company Ts current return on equity (ROE) is 16%. It pays out one-quarter of earnings as cash dividends (payout ratio = .25). Current book value per share is $35. The company has 5 million shares outstanding. Assume that ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 10% and the company increases the payout ratio to 60%. The company does not plan to issue or retire shares The cost of capital is 9 5% What is stock T worth? How much of stock T’s value is attributable to growth opportunities?Shirley and Sons pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $.30 a share for two years commencing two years from today. After that time, the company plans on paying a constant $1 a share dividend indefinitely. Given a required return of 14% p.a., what is the value of this stock?The Red Bud Company pays a constant dividend of $3.20 a share. The company announced today that it will continue to do this for another 2 years after which time they will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 8.8 percent?
- Company Q's current return on equity (ROE) is 14%. It pays out 60 percent of earnings as cash dividends (payout ratio = 0.60). Current book value per share is $70. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 12.5% and the payout ratio increases to 0.90. The cost of equity is 12.5%. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? What is Q's stock worth per share?Company Q’s current return on equity (ROE) is 16%. It pays out 60 percent of earnings as cash dividends (payout ratio = 0.60). Current book value per share is $57. Book value per share will grow as Q reinvests earnings.Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 12.5% and the payout ratio increases to 0.70. The cost of capital is 12.5%.a. What are Q’s EPS and dividends in years 1, 2, 3, 4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. What is Q’s stock worth per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Company Q's current return on equity (ROE) is 16%. It pays out 60 percent of earnings as cash dividends (payout ratio = 0.60). Current book value per share is $57. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 12.5% and the payout ratio increases to 0.70. The cost of equity is 12.5%. a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? b. What is Q's stock worth per share? Complete this question by entering your answers in the tabs below. Required A Required B What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year 1 2 EPS Dividends 34 5
- Company Q's current return on equity (ROE) is 13%. It pays out 45 percent of earnings as cash dividends (payout ratio = 0.45). Current book value per share is $63. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 11.0% and the payout ratio increases to 0.75. The cost of capital is 11.0%. a. What are Q's EPS and dividends in years 1, 2, 3, 4, and 5? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year 1 2 3 4 5 EPS Dividends b. What is Q's stock worth per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock worth per shareSu Lee's Cookware pays a constant dividend of $0.75 a share. The company announced today that they will continue to pay this for another 3 years after which time they will discontinue operations. What is one share of this stock worth today if the required rate of return is 18 percent?Nikul
- Company Q's current return on equity (ROE) is 20%. It pays out 45 percent of earnings as cash dividends (payout ratio 0.45). Current book value per share is $56. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next two years. After that, competition forces ROE down to 10.0% and the payout ratio increases to 0.80. The cost of capital is 11.0%. Question: What is Q's stock worth per share? O 106.1 O 121.7 O 111.6 118.2 O 74.9Company ABC forecasts to have an earning per share of $8 next year. If the company distributes all its earnings to shareholders as dividends, it will provide investors with a 10% expected return. Instead, company ABC decides to plowback 35% of the earnings at the firm’s current return on equity of 20%. What is the value of the stock before and after the plowback decision?company presently pays no dividend. You anticipate company will pay an annual dividend of $1.00 per share two years from today and you expect dividends to grow by 3% per year thereafter. If company’s equity cost of capital is 14%, then what is a fair value for a share of company today? Enter answer rounded to the nearest cent.