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jekas [21]
2 years ago
15

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 $1.75. The dividends are expected to grow at 21 percent over the next five years. In five years, the estimated payout ratio is 35 percent and the benchmark PE ratio is 33.
Business
1 answer:
Lyrx [107]2 years ago
7 0

Answer:

  1. $427.97
  2. $223.22

Explanation:

1. Target stock price in 5 years

First find the dividend in the 5th year;

= 1.75 * ( 1 + 21%)⁵

= $4.5390493

The calculate Earnings per Share;

= Dividend in 5th year/ Payout ratio

= 4.5390493 / 35%

= $12.968712

Now calculate the Share price;

= PE ratio * EPS

= 33 * 12.968712

= $427.97

2. Stock Price today assuming required return rate of 15%

This is the present values of all the dividends in addition to the stock price in 5 years.

= \frac{1.75 * 1.21}{1.15} + \frac{1.75 * 1.21^{2} }{1.15^{2} } + \frac{1.75 * 1.21^{3} }{1.15^{3}} + \frac{1.75 * 1.21^{4} }{1.15^{4} } + \frac{1.75 * 1.21^{5} }{1.15^{5} } + \frac{427.967 }{1.15^{5} }\\\\= 1.841304 + 1.9373724 + 2.0384526999 + 2.374451111856 + 2.2567097149 + 212.775235875\\\\= 223.2235258

= $223.22

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Answer:

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Explanation:

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6 0
2 years ago
Which of the following statements about packaging is the most accurate?
Alik [6]

The answer is: B. For most products, packaging performs only one basic function, to protect the goods inside during shipping, handling and storage. However, this is a critical function, so packaging Must be given a high priority.

I hope this helped. If so, please mark brainliest!

7 0
3 years ago
Comparable sales of duplexes in a market indicate a grm of 146. if the annual income of the subject is $24,000, what is the prop
WITCHER [35]

$3,504,000

Using GRM (Gross Rental Multiplier) to calculate value, simply multiply the estimated rental income by the GRM:

$24,000*146= $3,504,000  

7 0
3 years ago
The gdp deflator is used to calculate the inflation rate. True or False
Aleksandr [31]

Answer:

True

Explanation:

The nominal GDP is divided by the real GDP to calculate GDP deflator which is used to calculate the CPI and Inflation rate. So it is true that the GDP delfator is used to calculate inflation rate.

6 0
3 years ago
If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?
mihalych1998 [28]
$22,053.13  
For this problem, I will make the following assumptions 
1. You make 1 yearly deposit instead of breaking it down into 12 monthly deposits. 
2. The deposit of $2000 occurs at the end of each year.  
The formula for regular deposits is 
FV = PMT * (((1 + r/n)^(nt) - 1) / (r/n))
 where
 FV = Future value
 PMT = Payment per period
 r = interest rate
 n = number of periods per year
 t = number of years 
 So let's plug in the values and calculate
 FV = PMT * (((1 + r/n)^(nt) - 1) / (r/n))
 FV = 2000 * (((1 + 0.05/1)^(1*9) - 1) / (0.05/1))
 FV = 2000 * ((1.05^9 - 1)/0.05)
 FV = 2000 * ((1.551328216 - 1)/0.05)
 FV = 2000 * (0.551328216/0.05)
 FV = 2000 * 11.02656432
 FV = 22053.12864 
 Rounding to 2 decimal places gives 22053.13
8 0
3 years ago
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