Business 123 Introduction to InvestmentsMay I please have the solution for the following writing exercise?Thank you Johnson Controls (JCI), a global supplier of HVAC and other building infrastructure equipment, is currentlyselling for $77 per share. The dividends for the next three years are expected to be $1.48 for 2024, $1.56 for 2025,and $1.64 for 2026. The Value Line forecasts the price per share to be between $80 and $110 in three to five years.We will choose a price of $100 by the end of 2026. If we desire a rate of return of 10%, using the DiscountedCash Flow Model, what price would we value this stock? Is this a potentially good investment for us at 10%? (3

To determine the intrinsic value of Johnson Controls (JCI) stock using the Discounted Cash Flow…

Answered: Johnson Controls (JCI), a global…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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As an analyst for Kingbird Inc., you are responsible for many firms, including ADFC. Currently you have a "hold" recommendation on ADFC. The current price of ADFC is $154. You have conducted an extensive analysis of the industry and you feel that the probability the firm will capture a substantial share of the new market is 25 percent. If the firm is able to capture the new market, you are expecting earnings to grow at a rate of 45 percent per year for the next five years. In that case, the stock price would rise to $234 due to the unusually high growth rate of future earnings. However, you feel there is a 35-percent probability that the firm will face serious difficulties in the near future, in which case the stock price will fall to $114, and the earnings growth rate will drop to 3 percent. There is a 40-percent chance that nothing will change for the firm and its earnings growth rate will remain at 12 percent. Calculate the expected price in the future. (Round intermediate…
Lawrence McKibben is preparing a valuation of QuickChange Auto Centers, Inc. The FCFE per share for the current year is $0.75. The FCFE is expected to grow at 10 percent for next year, then at 26 percent annually for the following three years, and then at 6 percent in Year 5 and thereafter. QuickChange’s estimated beta is 2.00, and McKibben believes that current market conditions dictate a 4.5 percent risk-free rate of return and a 5.0 percent equity risk premium. Given McKibben’s assumptions, estimate the value of a share of QuickChange
The table here,, gives a detailed forecast of the size of the market by production volume. Assume that KMS expects to capture 10.20% of the market share in 2022 and expects that percentage will increase by 0.23% per year. KMS currently has the capacity to produce a maximum of 1,100,000 units. What production capacity will KMS require each year? When will an expansion become necessary (that is, when will production volume exceed 1,100,000 units)? The Tax Cuts and Jobs Act of 2017 temporarily allowed 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems. KMS's market share for 2022 is Data table units. (Round to the nearest integer.) (Click on the following icon in order to copy its contents into a spreadsheet.) Year Production Volume (000 units) Market Size Market Share 2022 2023 2024 2025 2026 2027 10,000 10.20% 10,350 11,036 11,593 12,130 12,762 10.43% 10.66% 10.89% 11.12%…
An investor expects the Bank of New York Mellon Corp. to increase its dividend by 6% per year for the next 20 years. Investors expect the company to earn $5.00 per share in 2024 (Year 1) and pay a dividend of $1.65. The payout ratio is expected to remain stable at 33%. After receiving the dividend in Year 20, the investor expects to sell the stock for $140. If the investor’s required return is 9%, what is the intrinsic value of the stock?
As a financial analyst working for CSFB your job is to evaluate the equity value of the WIFI Inc. Your research identified the following information about that firm: it would pay an annual dividend of $1.20 per share next year (in 2022) and the required rate of return on capital is 20%. (a) Suppose that dividends are expected to stay constant forever. What is the maximum amount you would pay today (in 2021) for WIFI Inc? For parts b, c and d assume that dividends grow at a constant 3% rate a year forever. (b) What is the maximum amount you would pay today (in 2021) for WIFI Inc’s share of stock? (c) What is the capital gains yield for WIFI Inc.? (d) What is the dividend yield for WIFI Inc.? For part (e) assume that the dividends will be as follows $1.20 in 2022, $1.40 in 2023 and $1.60 in 2024. After that, dividends are projected to increase at a constant rate of 2% per year forever. (e) How much are you willing to pay today (in 2021) to buy one share of this stock?
Maxwell Inc. announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $0.93 a share. The dividends will be $1.03 and $1.60 a share annually for the next two years, respectively. After that, dividends are projected to increase by 4.0 percent per year. How much are you willing to pay today to buy one share of this stock if your desired rate of return is 12 percent? $17.33 $20.51 $22.08 $24.00
XYZ Company announced today that it will begin paying annual dividends next year. The first dividend will be $0.1 a share. The following dividends will be $0.2, $0.3, and $0.4 a share annually for the following 3 years, respectively. After that, dividends are projected to increase by 3 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 10%?
The market capitalization rate for Admiral Motors Company is 12%. Its expected ROE is 9%. If the firm's plowback ratio is 50%, what will be its P/E ratio? Round your answer to one decimal place.
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MEINE ON The table below gives a detailed forecast of the size of the market by production volume. Assume that KMS expects to capture 10.20% of the market share in 2019 and expects that percentage will increase by 0.27% per year. KMS currently has the capacity to produce a maximum of 1,100,000 units. What production capacity will KMS require each year? When will an expansion become necessary (that is, when will production volume exceed 1,100,000 units)? Year Production Volume (000 units) Market Size KMS's market share for 2019 is KMS's market share for 2021 is KMS's market share for 2022 is 2019 KMS's market share for 2023 is 10,412 11,570 The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career. KMS's market share for 2024 is 2020 10,000 units.…
The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…
Genius Lab is expected pay $1 dividend per share at the end of the year. The dividend will grow 50% the following year (i.e., $1.5 is the second year dividend), then at 4% thereafter. If the required return for Genius Lab s is 7.5%, what is the intrinsic value of the stock? Round your answer to two decimal places.

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