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You are an analyst working for jp Morgan. You have been asked to value cleantech inc shares. You expect that the company’s earnings and dividends will grow at 6% for 2 years and then 3% thereafter. Cleantech’s dividend payout ratio is 60% and the company’s earnings per share at year-end 2021 are $1.05. The current risk

You are an analyst working for jp Morgan. You have been asked to value cleantech inc shares. You expect that the company’s earnings and dividends will grow at 6% for 2 years and then 3% thereafter. Cleantech’s dividend payout ratio is 60% and the company’s earnings per share at year-end 2021 are $1.05. The current risk

FINANCIAL ACCOUNTING
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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You are an analyst working for jp Morgan. You have been asked to value cleantech inc shares. You expect that the company’s earnings and dividends will grow at 6% for 2 years and then 3% thereafter. Cleantech’s dividend payout ratio is 60% and the company’s earnings per share at year-end 2021 are $1.05. The current risk free rate 2% and the market risk premium 6%. You have estimated cleantech ’beta to be 0.85

  1. What discount rate you use to estimate clean tech price per share
  2. What is cleantech dividend expected to be based on 2021 earning per share
  3. What is your estimate of cleantech dividend at the end of year 2
  4. What is your estimate of price at the end of year 2
  5. Based on your analysis what is your estimate of cleantech price
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