Use the following information to answer five questions related to the Abnormal Earnings Model; The current year is 2021. Lewis Hamilton, an equity analyst for Barclays, produces the following earnings and dividend estimates for Mercedes Limited for years 2022-2024. The required rate of return is 10%. The firm has no debt. Actual Estimated 2021 EPS 6.00 DPS 4.00 2022 7.00 4.00 2023 2024 4.00 6.00 4.00 4.00 1. What are the correct Normal Earnings in 2023? 2. What is the Abnormal Earnings Growth for 2024? 3. If Abnormal Earnings are expected to grow at a rate of 3% per year after 2024, what would the continuing value be in 2024? 4. What is the intrinsic value per share in 2021 (approximate)?
Use the following information to answer five questions related to the Abnormal Earnings Model; The current year is 2021. Lewis Hamilton, an equity analyst for Barclays, produces the following earnings and dividend estimates for Mercedes Limited for years 2022-2024. The required rate of return is 10%. The firm has no debt. Actual Estimated 2021 EPS 6.00 DPS 4.00 2022 7.00 4.00 2023 2024 4.00 6.00 4.00 4.00 1. What are the correct Normal Earnings in 2023? 2. What is the Abnormal Earnings Growth for 2024? 3. If Abnormal Earnings are expected to grow at a rate of 3% per year after 2024, what would the continuing value be in 2024? 4. What is the intrinsic value per share in 2021 (approximate)?
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
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Transcribed Image Text:Use the following information to answer five questions related to the Abnormal Earnings Model;
The current year is 2021. Lewis Hamilton, an equity analyst for Barclays, produces the following earnings and dividend estimates for
Mercedes Limited for years 2022-2024. The required rate of return is 10%. The firm has no debt.
Actual Estimated
2021
2022
EPS 6.00 7.00
DPS 4.00 4.00
2023 2024
4.00 6.00
4.00 4.00
1. What are the correct Normal Earnings in 2023?
2. What is the Abnormal Earnings Growth for 2024?
3. If Abnormal Earnings are expected to grow at a rate of 3% per year after 2024, what would the continuing value be in 2024?
4. What is the intrinsic value per share in 2021 (approximate)?
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