1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Natasha2012 [34]
3 years ago
11

Suppose that a firm’s recent earnings per share and dividend per share are $2.50 and $1.50, respectively. Both are expected to

grow at 9 percent. However, the firm’s current P/E ratio of 24 seems high for this growth rate. The P/E ratio is expected to fall to 20 within five years.
Compute the dividends over the next five years.

Compute the value of this stock in five years.

Calculate the present value of these cash flows using an 11 percent discount rate.
Business
1 answer:
Elis [28]3 years ago
7 0

Answer:

D0 1.50

D1 1.60

D2 1.78

D3 1.94

D4 2.12

D5 2.31

Price of the stock after 5-year $ 77

PV $ 81.75

Explanation:

Earning per share 2.5

Dividend per share 1.5

grow ratio 9%

P/E ratio 24

within 5 year is expected to fall to 20

We solve for the dividend by multiplying the dividends by the grow rate of 9%

We solve for the earning after 5 years:

Principal \: (1+ r)^{time} = Amount

Principal 2.50

time 5.00

rate 0.09000

2.5 \: (1+ 0.09)^{5} = Amount

Amount 3.85

Then we multiply by 20 to get the value of the stock:

$ 3.85 x 20 = $ 77

We solve the horizon value:

\frac{D_1}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\

\frac{1.5(1+0.09)}{0.11 - 0.09} = PV\\

PV $ 81.75

You might be interested in
If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, i
julsineya [31]

Answer:

D

Explanation:

If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.

6 0
3 years ago
Những nhân tố ảnh hưởng đến hành vi mua hàng của người tiêu dùng là gì
sergey [27]

Nhận thức, động cơ, học tập, niềm tin và thái độ là tất cả các yếu tố tâm lý ảnh hưởng đến việc mua hàng của người tiêu dùng. Quá trình mọi người lựa chọn và giải thích thông tin để đưa ra quyết định mua hàng được gọi là nhận thức.

8 0
2 years ago
Monopolistic competitors in the food industry, acting in their own self-interest, will often include a recyclable symbol on pack
anygoal [31]

Answer:

Differentiate their products

Explanation:

A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.

examples of monopolistic competition are restaurants

A monopolistic firm in the food industry acting in their own self-interest, will often include a recyclable symbol on packaging used for their product to Differentiate their products. This is meant to communicate to consumers that they are different from other firms in the industry

5 0
3 years ago
The Borio Company had an asset with an $8 book value and a $7 market value; it decided to distribute the asset as a property div
ankoles [38]

Answer:

The net income will decrease and also the total assets will also decrease

Explanation:

Here, we want to know the combined effect on net income and total assets of company that made a decision of distributing assets as a property dividend.

As the asset value is down the entry is asset (credit) and loss on asset (debit)

This will effect the net income as it will come down and total assets value also come down

7 0
3 years ago
The offeror may _____ the offer at any time prior to acceptance.
ivanzaharov [21]

Answer:

The offeror may retract the offer at any time prior to acceptance.

Most likely the offeror was able to get a better deal somewhere else, which allows the offeror to retract the offer. However, if they had already made a deal, the offeror would have broken the deal, which may result in action.

~

8 0
3 years ago
Other questions:
  • According to the concept of comparative advantage, a good should be produced in that nation where A. its domestic opportunity co
    13·1 answer
  • Agin i need help
    10·1 answer
  • A petty cash fund of $100 is replenished when the fund contains $14 in cash and receipts for $94. The entry to replenish the fun
    13·1 answer
  • LoRider Wheels sells high-quality bicycles and accessories. The store is known for a pleasant environment, friendly salespeople
    9·1 answer
  • In the post World War II period, considerable growth in total production took place in the United States. But at the same time,
    14·1 answer
  • In accordance with 1926.21(b)(2), the employer is required to instruct each employee in the _______________ of unsafe conditions
    14·1 answer
  • How important is a business plan?​
    10·2 answers
  • LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2021. In payment for the $24 mi
    14·1 answer
  • Overuse of the priority flag by a business email sender can lead to a reputation as?
    14·1 answer
  • Step 3: Creating a Balanced Family Budget
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!