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san4es73 [151]
3 years ago
12

Tropical Inc. has reported ROE of 0.07 and a dividend payout ratio of 0.6. Its expected earnings for the next year is $2.7 per s

hare, and the market capitalization rate is 0.15. What is Tropical's intrinsic value for today (t0)? Assume sustainable growth rate and constant growth DDM.
Business
2 answers:
kolbaska11 [484]3 years ago
8 0

Answer:

The Intrinsic value today is $13.28

Explanation:

Given ROE = 0.07, Payout ratio = 0.6, EPS  = $2.7, market cap = 0.15

MV = ?

Formula = D1/r-g

First need to find Dividends that are expected to be paid out

From what is given we will use the payout ratio formula

PR = DPS/EPS

0.6 = DPS/2.7

DPS/D1 = 0.6*2.7=$1.62

Also need to find g

g = ROE *retention ratio

    =0.07*(1-0.6)

    =0.028/2.8%

The market cap is rate that is commonly used as the approximation of the discount rate to calculate the present value of cash flows from a security

So sustituting to the formula

MV = 1.62/0.15-0.028

      =$13.28

Yanka [14]3 years ago
3 0

Answer:

Value per share today is $13.28

Explanation:

The sustainable growth rate can be calculated using the following formula,

Sustainable growth rate (g) = ROE * (1 - DividendPayout Ratio)

Where,

  • ROE is the return on equity
  • (1- dividend payout ratio) also known as retention ratio

Thus, g = 0.07 * (1-0.6) = 0.028 or 2.8%

The formula for price or intrinsic value per share is,

P0 or V = D1 / r-g

The earnings per share is Net income per share. Out of this net income, 60% will be paid out as dividends so dividend per share expected for next year is 2.7 * 0.6 = 1.62

Thus, value per share will be,

V = 1.62 / (0.15 - 0.028)   = $13.278 rounded off to 13.28

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OverLord2011 [107]

Answer:

Planning budget amount = $3,052.00

Explanation:

<em>The planning budget is als0 known as the </em><em>fixed budge</em><em>t . It is the budget prepared for the original level of activity intended or  planned for. As it's name implies, it is used for  planning purpose.</em>

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Firlakuza [10]

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Answer:

The answer is True.

Explanation:

Change in the demand for gasoline and or electricity is primarily set by the number of industrial or bulk users.

Scarce goods are allocated though the help of prices. It is important to note that demand for gasoline or electricity is <u>more elastic in the long term</u>, so small changes in price will alter supply and demand in either direction in the shortrun.

The demand for gas or electricity are by nature <em><u>inelastic.</u></em> This means that when prices go up, demand goes down <em><u>but not by much.</u></em>

It means that in the short term, the individuals cannot alter their lifestyle immediately to adjust for the hike in prices.

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In her work as an accountant, Sandra Garcia recognizes that for every transaction that affects an asset, an equal transaction mu
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To learn more about  hotel management visit:brainly.com/question/10979252

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