Problem 8-20 Spreadsheet Problem: P/E Model and Cash Flow Valuation (LG8-5, LG8-7)Suppose that a firm's recent earnings per share and dividend per share are $3.15 and $2.60, respectively. Both are expected to growat 6 percent. However, the firm's current P/E ratio of 27 seems high for this growth rate. The P/E ratio is expected to fall to 23 withinfive years.Compute the dividends over the next five years.Compute the value of this stock price in five years.Calculate the present value of these cash flows using an 8 percent discount rate.Complete this question by entering your answers in the tabs below.Dividends Stock pricePresent valueCompute the dividends over the next five years.Note: Do not round intermediate calculations. Round your answers to 3 decimal places.YearsFirst yearSecond yearThird yearFourth yearFifth yearDividendsDividendsStock price

Earnings per share = $3.15Dividends per share = $2.60Growth rate = 6%Expected PE ratio fall within…

Answered: Suppose that a firm's recent earnings…

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

See similar textbooks

Similar questions

An investor is setting up a fund which requires 18 years of contributions. The investor pays £200 per month for 15 years. After 15 years, the payments increase by £10 for the subsequent 3 years. All payments are made in arrears, i.e at the end of the period. The effective annual rate i = 2%. What is the value of the fund after 18 years? £ 数字 Enter an answer correct to 2 decimal places.
Staggert Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, the company expects its dividend growth rate to be constant at 7.0 percent. If the required rate of return is 17.0 percent, what is the current value of the stock? (Round intermediate calculations and final answer to 2 decimal places, e.g. 16.25.) Current Value $ ________________
Suppose that a firm's recent earnings per share and dividend per share are $3.10 and $2.10, respectively. Both are expected to grow 7 percent. However, the firm's current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected to fall to 26 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your answers to 3 decimal places Years First year Second year Third year Fourth year Fifth year Dividends Compute the value of this stock in five years. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price
Dhofar Supplies has its stock currently selling at OMR 63.25. The company is expected to grow at a constant rate of 7 percent. If the appropriate discount rate is 17 percent, what is the expected dividend, a year from now?
Orkazana Corporation is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 20 percent over the following year, and then 5 percent per year indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $80 per share. What is the projected dividend for the coming year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Projected dividend
4. The dividends that Firm A pays to its stockholders are expected to grow at 18% a year for the next nine years. From t=9 onwards, the growth rate in dividends will drop to 13.5% per year, and the firm expects to be able to sustain it at this level. Assuming that the market capitalization rate is 18% a year, work out the value of the firm assuming that the dividend expected to be paid at t=1 is $4.50.
PerfectlySoft Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 15 percent over the following year, and then 4 percent per year thereafter indefinitely. The required return on this stock is 8.18 percent, and the stock currently sells for $79.91 per share. What is the projected dividend (in $) for the coming year? Answer to two decimals, carry intermediate calcs. to four decimals.
News Corp is expected to pay a dividend of $0.8 in one year. The dividend is expected to grow at 12% in the following 3 years and then at a constant rate of 4% per annum indefinitely. If the required rate of return is 12%, what is the price of the company's share today? Please illustrate your answer using a timeline.
Zapata Corporation will pay dividends of USD 5.00, USD 6.00, and USD 7.00 in the next three years. Thereafter, the company expects its dividend growth rate to be a constant 10 percent. If the required rate of return is 15 percent, what is the current market price of Zapata stock?
Suppose the dividends for the Seger Corporation over the past six years were $1.40, $1.48, $1.57, $1.65, $1.75, and $1.80, respectively. Assume that the historical (arithmetic) average growth rates will remain the same for 2022. Compute the expected share price at the end of 2022 using the perpetual growth method. Assume the market risk premlum is 11.7 percent, Treasury bills yield 5.9 percent, and the projected beta of the firm is 0.88. Note: Do not round Intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Share price S 1.80
Please answer correctly and using excel formula. Please explain don't just wrote excel formula.
Mobray Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 7 percent per year indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $88 per share. What is the projected dividend for the coming year? (i.e. Div 1)

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS