Joker stock has a sustainable growth rate of 9 percent, ROE of 17 percent, and dividends...
Joker stock has a sustainable growth rate of 9 percent, ROE of 17 percent, and dividends per share of $1.55. If the P/E ratio is 15.5, what is the value of a share of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Share of stock $______
Homework Answers
Sustainable growth rate = 9%
ROE = 17%
Dividend = $1.55
Sustainable growth rate = ROE x retention rate
Sustainable growth rate = ROE x (1- Dividend payout ratio)
Sustainable growth rate = ROE x (1- DPS / EPS)
9% = 17% x (1-DPS / EPS)
0.529412 = 1 - DPS/EPS
DPS / EPS = 1 - 0.529412
1.55 / EPS = 0.470588
EPS = 3.29375
P/E = 15.5
Price / Earning per share = 15.5
Price = 15.5 x 3.29375 = 49.41
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