
Foundations of Finance (9th Edition) (Pearson Series in Finance)
9th Edition
ISBN: 9780134083285
Author: Arthur J. Keown, John D. Martin, J. William Petty
Publisher: PEARSON
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Chapter 13, Problem 11SP
Summary Introduction
To determine: The definition of each of the following dates and place them in their proper order with respect to the payment and receipt of cash dividends.
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Wilbur and Orville are brothers. They're both serious investors, but they have different approaches to valuing stocks. Wilbur, the older brother, likes to use the
dividend valuation model. Orville prefers the free cash flow to equity valuation model. As it turns out, right now, both of them are looking at the same stock-Wright
First Aerodynmaics, Inc. (WFA). The company has been listed on the NYSE for over 50 years and is widely regarded as a mature, rock-solid, dividend-paying stock.
The brothers have gathered the following information about WFA's stock:
Current dividend (D) = $3.30/share
Current free cash flow (FCF) = $1.5 million
Expected growth rate of dividends and cash flows (g)=8%
Required rate of return (r) = 13%
Shares outstanding 500,000 shares
How would Wilbur and Orville each value this stock?
The stock price from Wilbur's valuation is $
(Round to the nearest cent.)
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P/S Multiples
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13.67
Snap
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Twitter
13.55
Energy Resources generated an EPS of $4.38 over the last 12 months. The company's earnings are expected to grow by 30.7% next year, and because there will be
no significant change in the number of shares outstanding, EPS should grow at about the same rate. You feel the stock should trade at a P/E of around 30 times
earnings. Use the P/E approach to set a value on this stock.
Using the P/E approach, the value on this stock is $
(Round to the nearest cent.)
Chapter 13 Solutions
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Ch. 13 - What is meant by the term dividend payout ratio?Ch. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 3SPCh. 13 - (Dividend policy and stock prices) The issue as to...Ch. 13 - (Residual dividend policy) FarmCo, Inc. follows a...Ch. 13 - (Legal restrictions on dividend payments) Describe...Ch. 13 - (Practical considerations in setting dividend...Ch. 13 - Prob. 8SPCh. 13 - Prob. 9SPCh. 13 - Prob. 10SPCh. 13 - Prob. 11SPCh. 13 - Prob. 12SPCh. 13 - Prob. 13SPCh. 13 - Prob. 14SPCh. 13 - Prob. 15SPCh. 13 - Prob. 16SPCh. 13 - Prob. 1.1MCCh. 13 - The executive vice-president in charge of finance...Ch. 13 - Prob. 2.1MCCh. 13 - Prob. 2.2MCCh. 13 - Prob. 2.3MC
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