The following information has been collected regarding Big John C Most recent annual cash dividend per share $0.65 Dividend growth rate over the past five years 7% Most recent earnings per share $1.53 Average P/E ratio of similar firms 18 Required rate of return on equity capital 12%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following information has been collected regarding Big John Company:

- Most recent annual cash dividend per share: $0.65
- Dividend growth rate over the past five years: 7%
- Most recent earnings per share: $1.53
- Average P/E ratio of similar firms: 18
- Required rate of return on equity capital: 12%

Estimate a price per share for Big John’s stock using the constant dividend growth model.

Choices:
- $13.00
- $27.54
- $5.42
- $5.80
- $13.91

Note: The option $13.91 is marked with a selection icon. 

Submit Assessment Button located at the bottom.
Transcribed Image Text:The following information has been collected regarding Big John Company: - Most recent annual cash dividend per share: $0.65 - Dividend growth rate over the past five years: 7% - Most recent earnings per share: $1.53 - Average P/E ratio of similar firms: 18 - Required rate of return on equity capital: 12% Estimate a price per share for Big John’s stock using the constant dividend growth model. Choices: - $13.00 - $27.54 - $5.42 - $5.80 - $13.91 Note: The option $13.91 is marked with a selection icon. Submit Assessment Button located at the bottom.
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