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AVprozaik [17]
3 years ago
13

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five y

ears or so, then find the "terminal" stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.21. The dividends are expected to grow at 16 percent over the next five years. The company has a payout ratio of 40 percent and a benchmark PE of 23. The required return is 12 percent.
(A) What are the projected dividends for each of the next five years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g.,32.16).)
(B) What is the EPS in five years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
(C) What is the target stock price in five years? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Business
1 answer:
Vaselesa [24]3 years ago
5 0

Answer:

The answer is:

A. Find the detailed calculation in the explanation section.

B. $6.33

C. $145.59/share

Explanation:

A.

Current dividend paid is $1.21

Growth rate for the next 5 years is 16 percent.

Dividend per share in Year 1 = $1.40 per share [$1.21 x 1.16]

Dividend per share in Year 2 = $1. 62 per share [$1.40 x 1.16]

Dividend per share in Year 3 = $1.88 per share [$1.62 x 1.16]

Dividend per share in Year 4 = $2.18 per share [$1.88 x 1.16]

Dividend per share in Year 5 = $2.53 per share [$2.18 x 1.16]

B.

Earnings per share (EPS) in Year 5 = Dividend per share in year 5 / Pay-out Ratio

$2.53/0.4

=$6.33

C.

Target stock price in five years = EPS in Year 5 x Benchmark P/E Ratio

= $6.33 per share x 23times

= $145.59/share

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Answer:

B). $12

Explanation:

As per the given data, the AFC(Average Fixed Cost) for employing 25 factors of labor and 16 factors of capital would be $12.

We are given the production function,

Q = K^{0.5} L^{0.5}

where,

K = allotted input in short-term

Rental rate of each unit/factor(r) = $15

Wage per factor(w) = $5

As we know, the two inputs are labor, as well as, capital;

To find AFC, we need TC;

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TC = (Fixed cost + Variable cost)

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3 years ago
Suppose the reserve requirement is 5​%. What is the effect on total checkable deposits in the economy if bank reserves increase
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Answer:

D. ​$1 comma 000 billion increase

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In this case the reserve ratio it's 5%, which means that the total amount of deposits cannot exceed an amount equal to 20 times its reserves.  

If the reserves increase by $50 billion then $50/0,05 = 1.000 billion increase.

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3 years ago
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Complete question:

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