Energy Resources generated an EPS of $3.13 over the last 12 months. The company's earnings are expected togrow by 29.6% next year, and because there will be no significant change in the number of shares outstanding, EPSshould grow at about the same rate. You feel the stock should trade at a P/E of around 35 times earnings. Usethe P/E approach to set a value on this stock.***Using the P/E approach, the value on this stock is $ (Round to the nearest cent.)

Earning per share is a kind of ratio that is used to determine the company's profitability.…

Answered: Energy Resources generated an EPS of…

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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Similar questions

Meadow Dew Corporation currently has an EPS of $3.80, and the benchmark PE for the company is 37. Earnings are expected to grow at 10 percent per year. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the target stock price in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Assuming the company pays no dividends, what is the implied return on the company’s stock over the next year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The XYZ Company paid $1.95 dividend yesterday. Its dividend growth rate is expected to be constant at 21.90% for 2 years, after which dividends are expected to grow at a rate of 5.70% forever. Its required return (rs) is 13.55%. What is the best estimate of the current stock price? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
Varigrowth Inc. just paid a dividend of $1.96 (i.e., Do = $1.96). Such dividend is expected to grow by 10% per year for the next 3 years, after which it is expected to grow at a long-run rate of 4%. Assuming investors require a 14% return on the stock, a) What is the price at t=3? $ 13 (to the nearest cent) b) What is its price today? $ (to the nearest cent) c) What is your total rate of return (% to two decimals) if in one year the price is $23.56 and the dividend is $2.12? What is your capital gain (loss) yield?% What is your dividend yield?
The stock of Alpha Tool sells for $18.30 per share. Its current dividend rate, D0, is $2 per share. Analysts and investors expect Alpha to increase its dividends at a 10 percent rate for each of the next 2 years. This annual dividend growth rate is expected to decline to 6 percent for years 3 and 4 and then to settle down to 4 percent per year forever. Calculate the cost of internal equity for Alpha Tool. Use Table II for your calculations. Round your answer to the nearest whole number. %
XYZ, Inc. has been growing at 10% per year. You believe this rate will continue for 4 more years, and then will increase to 15% per year and remain indefinitely. If the most recent dividend paid was $3 (D0) and the required return is 10%, then what is the value of the stock today? create an excel file
A company just paid a dividend for $0.58 per share. Dividends are expected to grow by 20% in the first year and then 15% in the 2nd year. From Year 3 dividends are expected to grow at a constant rate of 5.6% indefinitely. If the required rate is 8.3%. What is the intrinsic value of the stock today?
McCracken Roofing, Inc., common stock paid a dividend of $1.41 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $26? b. If McCracken expects both earnings and dividends to grow at an annual rate of 11%,what required rate of return would result in a price per share of $26?
Meadow Dew Corporation currently has an EPS of $4.00, and the benchmark PE for the company is 39. Earnings are expected to grow at 5 percent per year. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the target stock price in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Assuming the company pays no dividends, what is the implied return on the company's stock over the next year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Current stock price b. Target stock price c. Implied return of stock %
Nachman Industres just paid a dividend of DO $3 per share. Analysts expect the company's dividend to grow by 30% this year, by 20% in Year 2, and at a constant rate of 1.3% in Year 3 and thereafter. The required return on Nachman's stock is 9.00%, What is the best estimate of the stock's current market value? (Note: this is a challenging question, which is similar to examples in the last few lecture slides. The method is the same as the discount free cash flow model for enterprise valuation. You replace the FCF with dividends.)
Summerdahl Resort's common stock is currently trading at $36 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00) and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity?
Turbo Technology Computers is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next two years, at 13% in the third year, and at a constant rate of 6% thereafter. Turbo's last dividend was $1.15, and the required rate of return on the stock is 12%. Complete the following calculations: a.Calculate the value of the stock today. b. Calculate P1^ and P2^. c. Calculate the dividend yield and capital gains yield for Years 1, 2, and 3. 2. Kassidy's Kabob House has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock's required rate of return? Assume the market is in equilibrium with the required return equal to the expected return. 3. McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The…
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?

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