Sultan Services has 1.4 million shares outstanding. It expects earnings at the end of the year of $5.20 million. Sultan pays out 60% of its earnings in total -40% paid out as dividends and 20% used to repurchase shares. If Sultan's earnings are expected to grow by 5% per year, these payout rates do not change, and Sultan's equity cost of capital is 11%, what is Sultan's share price? OA. $14.86 OB. $22.28 OC. $37.14 OD. $7.43

Sultan Services has 1.4 million shares outstanding. It expects earnings at the end of the year of $5.20 million. Sultan pays out 60% of its earnings in total -40% paid out as dividends and 20% used to repurchase shares. If Sultan's earnings are expected to grow by 5% per year, these payout rates do not change, and Sultan's equity cost of capital is 11%, what is Sultan's share price? OA. $14.86 OB. $22.28 OC. $37.14 OD. $7.43

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

Shatin Intl. has 9.8 million shares, an equity cost of capital of 12.8% and is expected to pay a total dividend of $19.1 million each year forever. It announces that it will increase its payout to shareholders. Instead of increasing its dividend, it will keep it constant and will start repurchasing $10.3 million of stock each year as well. What is your estimate of Shatin's stock price after this announcement?
Zoom Enterprises expects that one year from now it will pay a total dividend of $4.5 million and repurchase $4.5 million worth of shares. It plans to spend $9.0 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases. If Zoom's equity cost of capital is 13.5% and it has 4.9 million shares outstanding, what is its share price today?
ABC Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50% and the tax rate is 40%. The target capital structure consist of debt and 55% common equity. What is the companys WACC if all the equity used is from retained earnings?
Zoom Enterprises expects that one year from now it will pay a total dividend of $4.9 million and repurchase $4.9 million worth of shares It plans to spend $9.8 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases If Zoom's equity cost of capital is 12 5% and it has 5 4 million shares outstanding, what is its share price today? The price per share is $ (Round to the nearest cent)
NHL Inc.’s current return on equity (ROE) is 20%, its current book equity per share is $50, and it pays out half of its earnings as dividends. Both the ROE and payout ratio will stay constant for the next two years. After year 2, competition will force ROE down to 8%, and NHL will increase its payout ratio to 75%. The cost of capital is 10%. What is NHL’s stock price today?
BBB plc plans to pay a dividend next year of 41.2p per share and has a cost of equity of 9% per year. BBB plc has a dividend payout ratio of 50% and its EPS (earnings per share) is 80p. What is the ex-div share price of the company?
Little Oil has outstanding 1 million shares with a total market value of $29 million. The firm is expected to pay $1.00 million of dividends next year, and thereafter, the amount paid out is expected to grow by 5% a year in perpetuity. Thus, the expected dividend is $1.05 million in year 2, $1.1025 million in year 3, and so on. However, the company has heard that the value of a share depends on the flow of dividends, and therefore, it announces that next year's dividend will be increased to $2 million and that the extra cash will be raised immediately afterward by an issue of shares. After that, the total amount paid out each year will be as previously forecasted, that is, $1.05 million in year 2 and increasing by 5% in each subsequent year. A. At what price will the new shares be issued in year 1? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. B. How many shares will the firm need to issue? Note: Do not round intermediate calculations. Round your…
K AFW Industries has 189 million shares outstanding and expects earnings at the end of this year of $729 million. AFW plans to pay out 58% of its earnings in total, paying 36% as a dividend and using 22% to repurchase shares. If AFW's earnings are expected to grow by 7.2% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 11.4%. ECCORD The price per share will be $. (Round to the nearest cent.) his efu
J Aaron Inc. has 307 million shares outstanding. It expects earnings at the end of the year to be $570 million. The firm's equity cost of capital is 10%. Aaron pays out 50% of its earnings in total: 30% paid out as dividends and 20% used to repurchase shares. If Aaron's earnings are expected to grow at a constant 5% per year, what is Aaron's share price? OA. $9.29 OB. $27.86 OC. $18.57 OD. $37.14

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