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
More Parts Liquidators specializes in buying excess parts inventories for resale or to incorporate into other products. They rec
Alla [95]

Answer:

Sell the parts without any processing because the profit is higher ($20,000 vs $15,000)

Explanation:

they have two options:

  • option A, sell the parts as they are and make $20,000 in profits (= $120,000 - $100,000).
  • option B, further process the parts by spending $75,000 and sell them for $190,000, and make only $15,000 in profits (= $190,000 - $100,000 - $75,000).

The best option is A, to sell the parts without any processing because the profit is higher and they do not have to spend more money.

6 0
3 years ago
John discovered his company's accountant was "skimming" money from the business. The accountant agreed to pay John a one-time pa
Pani-rosa [81]

Answer:

There are no options listed, but what I can tell you for sure is that John's actions were both unethical and illegal.

What John did is unethical because it is not moral and it goes against all the principles that guide professional conduct. John also did something illegal because he was an accomplice in committing fraud against the company. He knowingly benefited from the accountant's illegal actions, and that is basically the legal definition of an accomplice to a crime.

8 0
3 years ago
Boyle Company makes fine jewelry that it sells to department stores throughout the United States. Boyle is trying to decide whic
Ksivusya [100]

Answer:

Explanation:

a)

Fixed Costs of Bracelet A

Advertising Costs   5,000$                                      

Annual depreciation 5,000$                                      

Total Fixed Costs   10,000$                

Fixed Costs for Bracelet B

Advertising Costs   3,000

Annual depreciation 4,000

Total Fixed Costs $ 7,000        

b)

Variable Costs for Bracelet A

Cost of Materials per unit $ 10                                            

Cost of labor per unit $ 15

Total Variable Costs per unit $25

Variable Costs for Bracelet B

Cost of Materials per unit $20

Cost of labor per unit $15

Total Variable Costs per unit $35                          

c) Avoidable costs

Avoidable Costs Bracelet A

Cost of Materials per unit $10

Cost of labor per unit $ 15

Avoidable Costs Bracelet B

Cost of Materials per unit $20

Cost of labor per unit $15

7 0
3 years ago
What do economists mean when they use the word "land"?
Ede4ka [16]
In economics, the resource that encompasses the natural resources used in production
4 0
3 years ago
Read 2 more answers
By examining the spreadsheet below, what part of the financial plan might be missing? A 2-column spreadsheet showing Cash Inflow
gogolik [260]

The correct statement is that in the <u>spreadsheet </u>below, a <u>financial plan</u> for<u> </u><u>protecting assets </u>is missing. So, the correct option is C.

A financial plan for protection of assets seems to be missing, as there is no payment of premium of insurances in cash outflow columns.

<h3>Financial Plan </h3>

A financial plan refers to as the estimation and strategy making of the cash flows that an individual or an organization is to manage.

In the example above, it can be seen that there are a lot of cash outflows, but not a single dollar is spent on protecting the assets by way of payment of insurance premium.

So, a financial plan for protecting assets is advised to be created, as the individual will require protection against any unwanted and unprecedented losses or damages.

Hence, the correct option is C that in the spreadsheet below, a financial plan for protecting assets is missing as there is no payment towards insurance premiums in the cash outflows.

Learn more about Financial Plan here:

brainly.com/question/1323646

3 0
2 years ago
Read 2 more answers
Other questions:
  • Next-generation enterprise suites use ________ and soa to link to systems of customers and suppliers.
    12·1 answer
  • 6. Which group tends to experience poverty most often?
    14·1 answer
  • Projects A and B are mutually exclusive and have an initial cost of $82,000 each. Project A provides cash inflows of $34,000 a y
    10·1 answer
  • In general, firms should use their weighted average cost of capital (WACC) to evaluate capital budgeting projects because most p
    13·1 answer
  • Which of the following is an advantage of consumer credit
    15·1 answer
  • A firm's CFO is considering increasing the target debt ratio, which would also increase the company's interest expense. New bond
    7·1 answer
  • While all members of the Federal Reserve Board of Governors vote at Federal Open Market Committee (FOMC) meetings, only______ of
    9·1 answer
  • What is the purpose of capital controls?
    9·1 answer
  • Ensuring land is put to the use for which it is best suited while also protecting livability of a community and property values
    10·1 answer
  • Newtech corporation is offering a 10% stock dividend. The firm currently has 200,000 shares outstanding and after-tax profits of
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!