Question

Question 19 10 points Save Answer Canyon Buff Corp. has $200 million in cash and 100 million shares outstanding. Analysts expect the firm to have earnings of $400 million this year. Canyon Buff plans to pay out 30% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If the firm's equity cost of capital is 15%, the weighted average cost of capital is 10%, and the earnings are expected to grow at a rate of 5% per year, then the value of a share of Canyon Buff's stock is $_ Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign needed, No comma sign. Round it to the nearest integer.

Answer 1

Answer: By using Given values we have to find the value of a share of canyon's Buff's Stock Given values: → Eaðning per share E $100 = $ 4 pershave >> Dividend pay out D = 30% = $ 1.2 per share. => Rate of return of investment 72 10% >> Pate of return required by shave holders K » 15% » Stock price : Formula : (0 + (E-DY/K) /k stock price: = [D+ (-Orik] lk. = [12+ [4-1.2] x 0.10 10.15]/0.15 3.066 -0.15 = 20.4 Therefore stock price = $20.4 ( Hence proved - x -