Please give me true answer this financial accounting question Smith Logistics has historically had a price-to-earnings (P/E) ratio of 12.5. Thecompany currently has a net income of $120,000 and 100,000 shares of stockoutstanding. The EPS growth rate is 5%. What is the expected price of this stock oneyear from now?A. $13.13B. $13.65C. $14.18D. $14.24E. $15.75

Step 1: Define Expected PriceThe expected price of a stock one year from now can be calculated using…

Answered: Smith Logistics has historically had a…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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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.
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?
What is the expected price of this stock one year from mow on these accounting question?
What is the expected price of this stock one year from now on these financial accounting question?
What is the premium for growth on the stock on these financial accounting question?
IRQ has common stock outstanding, which is trading at $25 per share. IRQ paid a dividend yesterday of $2.22 per share. The dividends are expected to grow at 3%. Their beta is 1.32 The current risk-rate is 3.24% The market risk premium is 6.75% What is the estimate of the cost of common equity (retained earnings)?
A company is expected to pay a dividend of $6.73 in the following period. If the expected growth rate of this dividend is 4.00% and the expected rate of return or discount rate for this stock is 11.00%, the current share price in dollars is closest to: O A. $99.99 O B. $61.18 O C. $96.14
ALPHO Inc. has paid annual dividends of $1.25 and $1.62, over the past two years. Dividends in the future are expected to be $2.00 and $2.45 over the next two years, then grow at a constant rate of 4%. Which one of the following formulas should be used to compute the value of the stock today? P0= D1/(1+k)1+ D2/(1+k)2 + ... + Dn/(1+k)n + Pn/(1+k)n P0= D/k P0= D1/(1+k)n+ g P0= D1/(k-g)
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
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
Apple Inc. (AAPL) is expected to pay a dividend of $1.59 at the end of the year. AAPL’s dividend payout ratio and return on equity (ROE) are 41.27% and 6.86%, respectively. Other things held constant, what would AAPL’s stock price be if the required rate of return is 6.47%? A. $93.14 B. $84.97 C. $72.26 D. $65.13
The current dividend yield on Ventana common stock is 1.89 percent. The company just paid an annual dividend of $1.56 and announced plans to pay $1.70 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock? Select one: a. 13.39% b. 12.75% c. 9.08% d. 10.86% e. 15.82%

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