ABC Inc. has earnings that have been growing at 30% per year. Next year’s earnings are projected to be $0.35 per share. The managers at ABC are aware that this growth will slow soon. In part, this awareness comes from the fact that investment opportunities are thinner than they once were. Managers anticipate that after next year’s earnings, earnings growth will slow to 20% per year for two years. A dividend payment will be initiated at this point (paid in year 3), and going forward from then it is expected that earnings growth will stabilize at 4% per year in perpetuity. Expected payout for the initial and on-going dividends is 60%. ABC’s required return is 8% per year. ABC is an all-equity company, and plans on staying that way. Value a share of ABC stock as of today.
ABC Inc. has earnings that have been growing at 30% per year. Next year’s earnings are projected ...
Grott and Perrin, Inc., has expected earnings of $3 per share for next year. The firm's ROE is 20%, and its earnings retention (plowback) ratio is 40%. If the firm's required rate of return is 15%, what is the present value of its growth opportunities (PVGO)?
Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $5 per share. a. If the market expects a 10% rate of return on Trend-Line, at what price must it be selling? (Do not round intermediate calculations.) Current selling price b. If Trend-Line's earnings per share will be $8 next year, what part of its value is due to assets in place?...
XYZ Inc. has expected earnings over the next year of $2/share (E1 = 2). The company is expected to maintain an earnings retention rate of 40%, i.e., 60% of earnings are expected to be paid out as dividends every year. The company has a beta of 1.5, the risk-free rate is 4%, and the market risk premium is also 4%. a. If the growth rate in earnings is expected to be 5% in perpetuity i. What is the value of...
You have estimated the following earnings and payout rates for XYZ Corporation for the next five years (see table below). If XYZ retains earnings they can be invested in new projects with an expected return of 25.13% per year. You anticipate that after year 5 XYZ will payout 77% of its earnings in perpetuity. Any earnings that are not retained will be paid out as dividends. Assume XYZ does not repurchase any shares and does not conduct any stock splits....
URGENT!! Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $8 per share. a. If the market expects a 10% rate of return on Trend-Line, at what price must it be selling? (Do not round intermediate calculations.) Current selling price b. If Trend-Line's earnings per share will be $12 next year, what part of its value is due to assets in...
Trend-Line Inc. has been growing at a rate of 6 percent per year and is expected to continue to do so indefinitely. The next dividend is expected to be $5 per share. If the market expects a 10 percent rate of return on Trend-Line and If Trend-Line's earnings per share will be $9, what part of Trend-Line's value is due to assets in place? what part of Trend-Line's value due to the growth opportunities?
8. Ace Ventura, Inc., has expected earnings of $5)per share for next year. The firm's ROE 0%, is 15%, and its earnings retention ratio is 40%. If the firm's market capitalization rate i what is the present value of its growth opportunities?
DFB, Inc. expects earnings next year of $5.01 per share, and it plans to pay a $3.42 dividend to shareholders (assume that is one year from now). DFB will retain $1.59 per share of its earnings to reinvest in new projects that have an expected return of 15.5% per year. Suppose DFB wil maintain the same idend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next...
DFB, Inc. expects earnings next year of $5.05 per share, and it plans to pay a $3.19 dividend to shareholders (assume that is one year from now). DFB will retain $1.86 per share of its earnings to reinvest in new projects that have an expected return of 14.2% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. Assume next...
Check my wa Trend-Line Inc. has been growing at a rate of 6% per year and is expected to continue to do so indefinitely. The next dividend is expected to be $5 per share. a. If the market expects a 10% rate of return on Trend-Line, at what price must it be selling? (Do not round intermediate calculations.) Current selling price b. If Trend-Line's earnings per share will be $8 next year, what part of its value is due to...