A firm’s earnings and dividends are expected to grow at a constant rate indefinitely, and it is expected to pay a dividend of $8.75 per share next year. Expected EPS and BVPS next year are $12 and $48, respectively. The cost of equity is 10 percent and there are 10,000 shares outstanding. Calculate the firm’s value, assuming that the retention ratio stays the same and the market value of debt is $500,000.
Answer to relevant QuestionsCalculate the cost of equity using the constant growth DDM given the following: current dividend = $3; payout ratio = 0.5 (assume it is not changing); ROE = 12%; and the current market price of the stock = $24. Is the ...A firm has the following capital structure based on market values: equity 65 percent and debt 35 percent. The current yield on government T-bills is 2 percent, the expected return on the market portfolio is 10 percent, and ...What is VFed given the expected earnings per share on the S&P 500 is $23.50 and the long-term U.S. bond rate is 4.75 percent?Calculate the fixed burden coverage and cash-flow-to-debt ratio given the following: EBIT = $700,000; depreciation and amortization = $60,000; preferred dividend $50,000; sinking fund payments = $10,000; tax rate = 20%; debt ...Susan and Celia are twins but have very different attitudes toward debt. Susan believes that firms should have a D/E ratio of 0.2 while Celia believes that the D/E ratio should be 1.1. Both sisters have agreed that Okanagan ...
Post your question