Consider the following information which relates to a given company: 2019 Value Item $6.09 Earnings Per Share Price Per Share (Common Stock) $41.34 Book Value (Common Stock Equity) $62.7 million 2.57 million Total Common Stock Outstanding Dividend Per Share $4.98 Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.93% in the future, or possibly 7.51% for the next 2 years and 5.35% thereafter. In addition, it is expected that the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.04% to 10.03%. Currently, the risk-free rate is 5.55%. Required: Assuming no growth in future dividends, and a required return of 16.21%, find the value per share of the firm's stock.

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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Consider the following information which relates to a given company:
2019 Value
Item
$6.09
Earnings Per Share
Price Per Share (Common Stock)
$41.34
$62.7
million
Book Value (Common Stock Equity)
2.57
million
Total Common Stock Outstanding
$4.98
Dividend Per Share
Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.93% in the
future, or possibly 7.51% for the next 2 years and 5.35% thereafter. In addition, it is expected that the risk of the firm, as
measured by the risk premium on its stock, to increase immediately from 8.04% to 10.03%. Currently, the risk-free rate
is 5.55%.
Required: Assuming no growth in future dividends, and a required return of 16.21%, find the value per share of the
firm's stock.
$4
(ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)
Transcribed Image Text:Consider the following information which relates to a given company: 2019 Value Item $6.09 Earnings Per Share Price Per Share (Common Stock) $41.34 $62.7 million Book Value (Common Stock Equity) 2.57 million Total Common Stock Outstanding $4.98 Dividend Per Share Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.93% in the future, or possibly 7.51% for the next 2 years and 5.35% thereafter. In addition, it is expected that the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.04% to 10.03%. Currently, the risk-free rate is 5.55%. Required: Assuming no growth in future dividends, and a required return of 16.21%, find the value per share of the firm's stock. $4 (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)
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