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
k0ka [10]
3 years ago
5

Fleury Security Limited (FSL) is projected to have earnings per share (EPS) of $3.50 next year, and the firm’s dividends are 30%

of earnings. Investors have a required return on FSL shares of 12.4%. The company has a profit margin of 10%, total asset turnover of 0.9, and total debt ratio of 0.4.
a) Calculate the ROE of the company.
b) Calculate the price of FSL shares.
c) How much of that price is due to future growth opportunities?
Business
1 answer:
ra1l [238]3 years ago
7 0

Answer and Explanation:

The computation is shown below:

a) For ROE of the company

As we know that

Debt ratio = 1 - (1 ÷  Equity multiplier)

0.4 = 1 - (1 ÷ Equity multiplier)

(1 ÷ Equity multiplier) = 0.6

Equity multiplier = 1 ÷ 0.6

= 1.6667

Now ROE is  

ROE = Net Profit Margin × Total Asset Turnover × Equity multiplier

= 10% × 0.9 × 1.6667

= 15%

b) For the Price of FSL shares

Expected Dividend next year (D1) = Projected EPS × Dividend payout ratio

= $3.50 × 30%

= $1.05  

And, Required Return(ke) = 12.4%

Growth Rate(g) = ROE × (1 - Dividend payout ratio)

= 15% × (1 - 0.30)

= 10.5%

And finally the Price of STock:-

= D1 ÷ (ke - g)

= $1.05 ÷ (0.124 - 0.105)

= $55.26

C. For  Present Value of Growth Opportunity(PVGO)

As we know that

Present Value of Growth Opportunity(PVGO) = Stock Price - (EPS ÷ Ke)

= $55.26 - ($3.50 ÷ 12.4%)

= $27.03

You might be interested in
Pine Corp. produces three products, and currently has a shortage of machine hours since one of its two machines is down. The sel
yulyashka [42]

Answer:

product B

Explanation:

The computation is shown below;

<u>Particulars           Product A          Product B             Product C </u>

Selling Price            $5.00                $3.00                  $5.00

Less: Variable cost per unit ($3.50)   ($2.00)               ($2.00)

Contribution per unit     $1.50               $1.00                $3.00

Machine hours per unit   0.75                 0.25                    1

Contribution per machine hour $2.00   $4.00            $3.00

                                         ($1.50 ÷ 0.75)  ($1.00 ÷ 0.25)   ($3.00 ÷ 1)

The product B should be produced as it has the highest contribution per machine hour

6 0
3 years ago
terrence’s team is very close and tends to agree on most decisions with little discussion. terrence should be concerned about
ad-work [718]

Terrence should be concerned about groupthink.

  • Groupthink refers to the common opinion or group consensus suppresses people's ability to provide alternative solutions to the problem as a result all the members of the group agree on the same conclusion.
  • The desire to promote group cohesion and deduction of common conclusion to a problem negatively affects the promotion of thinking abilities, good decision making abilities, and problem solving abilities of group mates.
  • When a team mates derive a common conclusion without an elaborate discussion or with a little discussion. It is indicative of problem of groupthink.

Hence, Terrence should be concerned about groupthink as the team agree on most decisions with little discussion.

Learn more about decision:

brainly.com/question/24128805

4 0
3 years ago
Read 2 more answers
In dual agency, which duty would be the easiest to carry out for both clients?
Lena [83]
In dual agency, which duty would be the easiest to carry out for both clients? Care. In business law, care means that the person who is licensed will carry out their duties to the best of their ability and competently. 
5 0
3 years ago
This is my fav HALO: 5 Assassination
Zina [86]

Answer:

No Halo 3 is.

Explanation:

Halo 3 is much better even if you haven't played it. It is a xbox 360 game and came out on September 25, 2007.

6 0
3 years ago
During pasteurization, milk is heated to a specific temperature to destroy an harmful ___.
agasfer [191]

milk is heated to destroy harmful bacteria

4 0
3 years ago
Other questions:
  • According to Mikey, the founder, Holden Outerwear does not manufacture its garments in the United States because of the: aplicat
    14·1 answer
  • When the market is more optimistic about a firm, its share price will ______; as a result, it will need to issue _______ shares
    8·1 answer
  • Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on
    13·1 answer
  • Government Spending
    8·1 answer
  • All of the related jobs you do during your life are called your
    12·1 answer
  • Which one of the following is correct about variable costing systems?
    13·1 answer
  • Overall what statement is most true of Judith
    9·1 answer
  • What is brand personality​
    12·1 answer
  • Can y’all help me with these question real quick please? Thanks :)
    13·1 answer
  • The channels through which advertising is carried to prospective customers are advertising: Group of answer choices conduits med
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!