Question: Calculate the cost of equity using the constant growth DDM
Calculate 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 current management adding to or reducing the shareholders’ value?
Answer to relevant QuestionsCalculate PVGO and PVEO given the following information: ROE1 = 20%; ROE2 = 25%; further investment (Inv) = $100; BVPS = $10; and Ke = 10%. Is this firm a star? If not, what is it according to Boston Consulting Group?A firm has the following balance sheet items:The before-tax interest cost on new 15-year debt would be 7.5 percent, and each $1,000 bond would net the firm $975 after issuing costs. Common shares could be sold to net the ...Rocky Mountain Depot just announced its EPS of $4.50. Retention ratio (b) = 0.6. The earnings are expected to grow at 10 percent for one year and then at 5 percent indefinitely. Given that Ke = 17%, what is the market price?Calculate Altman’s Z score for Home Depot in fiscal year 2011 (as of January 29, 2012) and then compare it with Moody’s rating chart. Is this company an IG or non-IG? All numbers are inmillions.The Saskatchewan Botanicals Company expects a free cash flow of $1.2 million every year forever. Saskatchewan Botanicals currently has no debt, and its cost of equity is 20 percent. The corporate tax rate is 20 percent. The ...
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