What is the expected price of this stock one year from mow on these accounting question? Historically, Jones Trucking has had a price-to-earnings ratio of 14.6. The firm has a current netincome of $92,000 with 85,000 shares of stockoutstanding. The EPS growth rate is 4.5 percent.What is the expected price of this stock one yearfrom now?A. $15.32B. $15.85C. $16.41D. $16.51E. $17.10

Step 1: Given Value for Calculation Price to Earning Ratio = per = 14.6Current Net Income = ni0 =…

Answered: Historically, Jones Trucking has had a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 10P

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CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?
The Castle Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company’s stock currently trades at $60 per share. Compute the stock’s earnings per share (EPS). What is the stock’s P/E ratio? Determine what the stock’s dividend yield would be if it paid $1.75 per share to common stockholders.
The current book value per share of B.L. Black & Sons is $4.5 and the required return on the stock is 10 percent. The firm expects earnings per share of $2.5 next year with annual earnings growth of 4 percent. What is the current market value of this stock? a. $9.16 b. $18.27 c. $13.88 d. $38.67 e. $10.91
A firm recently paid a $1.91 per share dividend. The dividend is expected to grow by 5.15% per year. At the current stock price of $13.50 per share, what is the return shareholders are expecting? 14.15% 14.88% 19.30% 20.03%
What is the expected price of this stock one year from now on these financial accounting question?
The common stock of Dayton Repair sells for $43.19 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The firm has established a pattern of increasing its dividends by 3.25 percent annually and expects to continue doing so. What is the required rate of return on this stock? O 7.65% O 8.70% 8.53% O 7.53%
The market capitalization rate on the stock of Aberdeen Wholesale Company is 10%. Its expected ROE is 12%, and its expected EPS is $5. If the firm's payout ratio is 40%, what is the value of the stock assuming a constant growth of dividends? Round your answer to two decimal places
Financial Accounting
NoRagrets, Inc is expected to pay a dividend in year 1 of $2 and a dividend in year 2 of $2.40. After year 2, dividends are expected to grow at the rate of 6% per year. An appropriate required return for the stock is 9%. The stock should be worth _______ today. Select one: a. $79.63 b. $73.21 c. $67.32 d. $73.37
Gerard Consolidated’s last annual dividend was $1.40. The dividend is expected to grow by 20% this year, 16% next year, 12% the year after next, and 8% from the following year forward. If the required return on Gerard’s common stock is 13.50%, what is the intrinsic value of Gerard’s common stock?
McCracken Roofing, Inc., common stock paid a dividend of $1.34per share last year. The company expects earnings and dividends to grow at a rate of 6% per year for the foreseeable future. a. What required rate of return for this stock would result in a price per share of $22? b. If McCracken expects both earnings and dividends to grow at an annual rate of 12%, what required rate of return would result in a price per share of $22?
Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current price of Jiffy common stock is $60 per share. What is the cost of internal common equity (retained earnings) if the long-term growth in dividends is projected to be 9 percent indefinitely? a. 15 percent b. 14 percent c. 16 percent d. 13 percent

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