The following questions are based on a stock and its derivatives. Relevant information is listed in the Table below. Fundamental information Number of shares outstanding Debt-to-capital ratio Current dividend Retention ratio Current free cash flow to the firm (FCFF) Market information Market value of debt Tax rate Estimations of equity analysts Long-term growth of FCFF Short-term return on equity (ROE) for the first 2 years Long-term return on equity (ROE) Required return of debt Required return of equity 50,000 25% £1 40% £60,000 £2,000,000 30% 10% 30% 20% 5% 15% (a) An equity analyst applies the dividend discount model (DDM) to evaluate the stock price. Determine the stock price by DDM.
The following questions are based on a stock and its derivatives. Relevant information is listed in the Table below. Fundamental information Number of shares outstanding Debt-to-capital ratio Current dividend Retention ratio Current free cash flow to the firm (FCFF) Market information Market value of debt Tax rate Estimations of equity analysts Long-term growth of FCFF Short-term return on equity (ROE) for the first 2 years Long-term return on equity (ROE) Required return of debt Required return of equity 50,000 25% £1 40% £60,000 £2,000,000 30% 10% 30% 20% 5% 15% (a) An equity analyst applies the dividend discount model (DDM) to evaluate the stock price. Determine the stock price by DDM.
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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Question
![The following questions are based on a stock and its derivatives. Relevant information
is listed in the Table below.
Fundamental information
Number of shares outstanding
Debt-to-capital ratio
Current dividend
Retention ratio
Current free cash flow to the firm (FCFF)
Market information
Market value of debt
Tax rate
Estimations of equity analysts
Long-term growth of FCFF
Short-term return on equity (ROE) for the first 2 years
Long-term return on equity (ROE)
Required return of debt
Required return of equity
50,000
25%
£1
40%
£60,000
£2,000,000
30%
10%
30%
20%
5%
15%
(a) An equity analyst applies the dividend discount model (DDM) to evaluate the
stock price. Determine the stock price by DDM.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F24642e2d-a07b-4d13-b8dd-b98d3636f286%2F6021b06b-629e-41dc-b9de-d99ab72c5ddd%2F7435f27_processed.png&w=3840&q=75)
Transcribed Image Text:The following questions are based on a stock and its derivatives. Relevant information
is listed in the Table below.
Fundamental information
Number of shares outstanding
Debt-to-capital ratio
Current dividend
Retention ratio
Current free cash flow to the firm (FCFF)
Market information
Market value of debt
Tax rate
Estimations of equity analysts
Long-term growth of FCFF
Short-term return on equity (ROE) for the first 2 years
Long-term return on equity (ROE)
Required return of debt
Required return of equity
50,000
25%
£1
40%
£60,000
£2,000,000
30%
10%
30%
20%
5%
15%
(a) An equity analyst applies the dividend discount model (DDM) to evaluate the
stock price. Determine the stock price by DDM.
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