Stock valuation Lory Company had net earnings of $127,000 past year, of which $46,200 was paid out in dividends. The company's equity was $1,587,500. Lory has 200,000 shares outstanding with a current market price of $11.63 per share. Both the number of shares and the dividend payout ratio are constant. Requirements: a) What is the required rate of return on equity if the earnings growth rate is 5.6 percent and is expected to remain constant at the current level? b) Following question a) above, what is the expected stock price in 15 years?
Stock valuation Lory Company had net earnings of $127,000 past year, of which $46,200 was paid out in dividends. The company's equity was $1,587,500. Lory has 200,000 shares outstanding with a current market price of $11.63 per share. Both the number of shares and the dividend payout ratio are constant. Requirements: a) What is the required rate of return on equity if the earnings growth rate is 5.6 percent and is expected to remain constant at the current level? b) Following question a) above, what is the expected stock price in 15 years?
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter12: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 4FPE: The Castle Company recently reported net profits after taxes of $15.8 million. It has 2.5 million...
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Stock valuation Lory Company had net earnings of $127,000 past year, of which $46,200 was paid out in dividends. The company's equity was $1,587,500. Lory has 200,000 shares outstanding with a current market price of $11.63 per share. Both the number of shares and the dividend payout ratio are constant. Requirements: a) What is the required rate of
b) Following question a) above, what is the expected stock price in 15 years?
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