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Gelneren [198K]
3 years ago
7

Hughes Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth

rate falling off to a constant 5 percent thereafter. If the required return is 12 percent and the company just paid a $2.35 dividend, what is the current share price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Business
1 answer:
Oksana_A [137]3 years ago
7 0

Answer: $53.94

Explanation:

Current share price is the present value of the dividends for the next 3 years and the terminal value in year 3.

Terminal value = D₄ / ( required return - growth rate)

= (2.35 * 1.22³ * 1.05) / (12 % - 5%)

= $64

D₁ = 2.35 * 1.22 = $2.867

D₂ = 2.867 * 1.22 = $‭3.49774‬

D₃ = ‭3.49774‬ * 1.22 = $‭4.2672428‬

Share price = (2.867 / (1 + 12%)) + (‭3.49774‬ / 1.12²) + (‭4.2672428‬ / 1.12³) + (64/1.12³)

= $53.94

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3 years ago
jphone, inc., has an equity multiplier of 1.41, total asset turnover of 1.7, and a profit margin of 8 percent.
lukranit [14]

ROE = 15.40 is the right answer.

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ROE = (7 x 1.63 x 1.35)

ROE = 15.40

<h3>What is Return on Equity?</h3>

The efficiency of a company's management team in managing the capital that shareholders have invested in it can be gauged by investors using the ratio known as return on equity (ROE). In other words, return on equity evaluates how profitable a company is in comparison to the equity held by stockholders. A company's management is more effective at generating revenue and growth from its equity financing the higher the ROE.

Using ROE, one may assess a business's position in relation to the market and its rivals.

The method is especially useful when comparing businesses in the same industry since it can be used to evaluate almost any company with a focus more on tangible than intangible assets and to identify which businesses are more financially efficient.

Shareholder equity divided by net income is referred to as the return on equity (ROE).

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brainly.com/question/27821130

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8 0
1 year ago
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Anika [276]

Answer:

c

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Alinara [238K]

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