In September 2008 the shares of Dell, Inc., the computer maker, traded at $20.50 each. Analysts were
Question:
In September 2008 the shares of Dell, Inc., the computer maker, traded at $20.50 each. Analysts were forecasting earnings per share of $1.47 for fiscal year 2009 and $1.77 for 2010. Refer to Dell's balance sheet in Exhibit 2.1 in Chapter 2 to calculate its book value at the end of the fiscal year ending February 1, 2008. Dell pays no dividends. Use a required return of 10 percent to answer the following questions:
a. Calculate the per-share value of Dell in 2008 based on the analysts' forecasts, with an additional forecast that residual earnings will grow at the anticipated GDP growth rate of 4 percent per year after 2010.
b. Given the analysts' forecasts, what was the market's forecast of the residual earnings growth rate after 2010?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a The pro forma for 2009 and 2010 and the value it implies is as follows 2008 2009 201...View the full answer
