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sergey [27]
3 years ago
7

ABC Co. has 165 million shares outstanding and expects earnings at the end of this year of $2.05 billion. ABC plans to pay out 4

0% of its earnings in total, paying 25% as a dividend and using 15% to repurchase shares. If ABC’s earnings are expected to grow by 9.2% per year and these payout rates remain constant, determine ABC’s share price assuming equity cost of capital 15%.
Business
1 answer:
frosja888 [35]3 years ago
8 0

Answer:

Share price = $85.684

Explanation:

It is given that  ,Ke = cost of equity = 15% ,g = Growth = 9.2%%  and Dividend and Repurchase = 40%

Now we know that

PV = CF /(Ke- g)

PV = $2.05 billion*0.4 / (0.15-0.092) = 0.84 billion /0.058

=$14137931034.483

Share price = $14137931034.483 / 165000000 million

Share price = $85.684

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a. Decrease

b. Decline

c. Exit

d. No change

Explanation:

The market for gourmet chocolate is in the long-run equilibrium, and an economic downturn has caused the consumer disposable income to fall. Chocolate is a normal good, and the chocolate producers have identical cost structures.

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The income statement and a schedule reconciling cash flows from operating activities to net income are provided below for Macros
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You would like to be a millionaire when you retire in 40 years, and how much you must invest today to reach that goal clearly de
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Answer:

1.

PV = $19108.96057 rounded off to $19108.96

So, $19108.96057 have to be invested today at 10.4% p.a. rate for 40 years for it to turn into a million dollars.

2.

PV = $131634.7058 rounded off to $131634.71

So, $131634.7058 have to be invested today at 5.2% p.a. rate for 40 years for it to turn into a million dollars.

3.

Times more investment = 6.888637682 times rounded off to 6.89 times

Explanation:

1.

To calculate how much we need to invest today for it to turn into $1 million in 40 years at 10.4% per annum rate, we will use the Present value of a sum formula as we need to determine the present value of $1 million earned after 40 years from today. The formula for present value of a sum is,

PV = FV / (1+r)^t

Where,

  • PV is present value
  • FV is future value
  • r is the rate of interest or return
  • t is the time period in years

PV = 1,000,000 / (1+0.104)^40

PV = $19108.96057 rounded off to $19108.96

So, $19108.96057 have to be invested today at 10.4% p.a. rate for 40 years for it to turn into a million dollars.

2.

Half the percentage rate of 10.4% p.a. = 10.4% / 2  =  5.2%

PV = 1,000,000  /  (1+0.052)^40

PV = $131634.7058 rounded off to $131634.71

So, $131634.7058 have to be invested today at 5.2% p.a. rate for 40 years for it to turn into a million dollars.

3.

Times more investment = 131634.7058  /  19108.96057

Times more investment = 6.888637682 times rounded off to 6.89 times

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