year. Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If Rufusʹ equity cost of capital is 15% and Rufusʹ earnings are expected to grow at a rate of 3% per year, then the value of a share of R

year. Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If Rufusʹ equity cost of capital is 15% and Rufusʹ earnings are expected to grow at a rate of 3% per year, then the value of a share of R

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: You must estimate the intrinsic value of Petty Corporation's stock. The end-of-year free cash flow…

A: The intrinsic value of a stock is the fair value of the stock derived using an appropriate valuation…

Q: Zozan Corp has just paid a dividend of $2 per share. The company's dividends are expected to grow at…

A: The objective of this question is to calculate the current share price of Zozan Corp given the…

Q: What is the current value per share?

A: The current value per share means the price of share prevailing in the market. The discount rate is…

Q: Shatin Intl. has 10.4 million shares, an equity cost of capital of 13.3% and is expected to pay a…

A: As there are no taxes and no other imperfect market conditions, the dividend payment or repurchase,…

Q: Shatin Intl. has 10.5 million shares, an equity cost of capital of 12.5% and is expected to pay a…

A: Total Expected Payout per share=Expected Dividends+Expected RepurchasesShares Outstanding Stock…

Q: Portage Bay Enterprises has $ 1 million in excess cash, no debt, and is expected to have free cash…

A: A stock is a financial security. The valuation of a stock, like most financial securities, is based…

Q: Shatin Intl. has 10.1 million shares, an equity cost of capital of 13% and is expected to pay a…

A: > Given data:> Annual dividend = 19.9 million> Annual repurchased amount = $10.2 million…

Q: FW Industries has 196 million shares outstanding and expects earnings at the end of next year of…

A: Expected Earnings =$672 millionOustanding shares =196millionPayout ratio =60%Growth rate =8.9%Cost…

Q: Portage Bay Enterprises has $2.5 million in excess cash, no debt, and is expected to have free cash…

A: A stock is a financial security. The valuation of a stock, like most financial securities, is based…

Q: Aaron Inc. has 344 million shares outstanding. It expects earnings at the end of the year to be $575…

A: Expected earnings next year = $575 millionDividend payout ratio = 50%Expected Dividends = Expected…

Q: Summit Systems will pay a dividend of $1.45 this year. If you expect Summit's dividend to grow by…

A: The Gordon Growth Model is a financial valuation model used to estimate the price per share of a…

Q: Harvey Gorman expects earnings of $93.0 million at the end of the year (at t=1) and to pay dividends…

A: Dividend discount modelIt is used to calculate the value of equity. The sum of the present value of…

Q: ZippleCrunch Corp. will pay a dividend of $2.34 per share at the end of next year (end of year 1)…

A: We will first calculate the dividend rate thereafter we will use that dividend to calculate the…

Q: Zozan Corp has just paid a dividend of $2 per share. The company's dividends are expected to grow at…

A: Curent stock price can be determined by discounting the expected dividend and the terminal value of…

Q: CX Enterprises has the following expected dividends: $1.15 in one year, $1.25 in two years, and…

A: Stock refers to ownership shares in a business.A company's ownership is split up into shares, each…

Q: ɔ. How many shares will the firm need to issue? (Do not round intermediate calculations. Round your…

A: a) Cost of equity = expected dividend next year/market value + constant growth rate = $1 million/$20…

Q: om Enterprises expects that one year from now it will pay a total dividend of $4.5 million and…

A: Value of shares can be found as the present value of dividend based on the required rate of return.

Q: The firm is forecasting its retained earnings equal to $300,000 in the coming year. Once retained…

A: When a company needs funds, it can either use its required profits(internal funding) or raise…

Q: AFW Industries has 182 million shares outstanding and expects earnings at the end of this year of…

A: We need to use constant growth model to calculate stock price. The formula is Share Price(P0) =D1r-g…

Q: Valence Electronics has 215 million shares outstanding. It expects earnings at the end of the year…

A: We need to use constant growth model to calculate stock value. The equation of constant growth model…

Q: Zoom Enterprises expects that one year from now it will pay a total dividend of $4.9 million and…

A: Value of shares can be found as the present value of the dividend based on the required rate of…

Q: NHL Inc.'s current return on equity (ROE) is 20%, its current book equity per share is $50, and it…

A: Information Provided:Current ROE = 20%Payout Ratio = 50%Current book value per share = $50Cost of…

Q: Aaron Inc. has 301 million shares outstanding. It expects earnings at the end of the year to be $602…

A: Number of Share = n = 301 MillionExpected Earning = e = $602 millionCost of Equity = r = 10%Payout…

Q: nterprises has the following expected dividends: $1.13 in one year $1.19 in two years, and $1.34 in…

A: Year 1 dividend = $ 1.13 Year 2 dividend = $ 1.19 Year 3 dividend = $ 1.34 Growth rate = 3.8% Year 4…

Q: Aaron Inc. has 301 million shares outstanding. It expects earnings at the end of the year to be $638…

A: The cost of capital is a vital financial metric that signifies the company's overall expense to…

Q: Shatin Intl. has 9.9 million shares, an equity cost of capital of 12.7% and is expected to pay a…

A: Future value of total dividend = $19.4 millionRepurchasing stock = $10.2 millionEquity cost of…

Q: Shatin Intl. has 10.3 million shares, an equity cost of capital of 12.6% and is expected to pay a…

A: Total Stock Value = (Future value of total dividends + repurchasing of stocks) / equity cost of…

Q: Shatin Intl. has 9.7 million shares, an equity cost of capital of 13.3% and is expected to pay a…

A: A stock price is the current market value of a share of stock in a publicly traded company. It is…

Q: CX Enterprises has the following expected dividends: $1.12 in one year, $1.24 in two years, and…

A: Here, To Find: Current price of the stock =?

Q: AFW Industries has 180 million shares outstanding and expects earnings at the end of this year of…

A: Expected Earnings =$735millionOustanding shares =180millionPayout ratio =56%Growth rate =8.9%Cost of…

Q: ABC Company is growing very rapidly. It expects to pay a dividend of $2.35 per share at the end of…

A: In the given case, we have provided the expected dividend for the first year. Thereafter, the…

Q: CX Enterprises has the following expected dividends: $1.13 in one year, $1.21 in two years, and…

A: Growth rate = 4.4%Cost of capital = 12.2%Dividend in year 1 = $1.13Dividend in year 2 =…

Q: Von Bora Corporation (VBC) is expected to pay a $4.00 dividend at the end of this year. If you…

A: Value of a share of VBS stock = Dividend / (Required return - Growth rate) Dividend = $4.00 Required…

Q: AFW Industries has 211 million shares outstanding and expects earnings at the end of this year of…

A: Total dividends to be paid= $652 million x 0.58= $378.16 millionExpected dividend per share (D1)=…

Q: Beta Corporation’s current stock price is $90 and total number of shares is 1 billion. The company…

A: Total dividend paid $10 billion Total number of shares 1 billion Dividend per share ($10 billion…

Q: Sultan Services has 1.4 million shares outstanding. It expects earnings at the end of the year of…

A: Number of shares = n = 1.4 millionTotal Earnings = te = $ 5.2 millionPayout rate = p = 60%Growth…

Question

The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year. Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If Rufusʹ equity cost of capital is 15% and Rufusʹ earnings are expected to grow at a rate of 3% per year, then the value of a share of Rufus stock is closest to:

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Given

VIEW

Step 2: Price per share

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

K Zoom Enterprises expects that one year from now it will pay a total dividend of $4.8 million and repurchase $4.8 million worth of shares. It plans to spend $9.6 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 13.2% and it has 4.7 million shares outstanding, what is its share price today? The price per share is $ (Round to the nearest cent.)
i need the answer quickly
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?
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)
Boston Company has just paid dividends of $2.5 per share, which the company projects will grow at a constant rate of 5 percent forever. If Boston Company’s shareholders require 15 percent rate of return, what is the price of its common stock? Can you show the excel formula?
We are trying to value the technology company B&B's share price. If the appropriate industry PE for this type of company is 5 and you predict net income for B&B to be $3 million for the coming year. Assuming the firm has 1 million shares of common stock. What is the forecasted stock price for a year from now? $3 $10 $8 $15
Shatin Intl. has 10 million shares, an equity cost of capital 12%, and is expected to pay a total dividend of $20 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 $12 million of stock each year as well. How much will its stock price increase? The stock price will increase by $ (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?
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