Question: Manufactured Earnings is a darling of Wall Street analysts Its
Manufactured Earnings is a “darling” of Wall Street analysts. Its current market price is $15 per share, and its book value is $5 per share. Analysts forecast that the firm’s book value will grow by 10 percent per year indefinitely, and the cost of equity is 15 percent. Given these facts, what is the market’s expectation of the firm’s long-term average ROE?
Answer to relevant QuestionsGiven the information in Question 3, what will be Manufactured Earnings’ stock price if the market revises its expectations of long-term average ROE to 20 percent?Janet Stringer argues that “the DCF valuation method has increased managers’ focus on short-term rather than long-term performance, since the discounting process places much heavier weight on short-term cash flows than ...Calculate the proportion of terminal value to total estimated value of equity under the abnormal earnings method and the discounted cash flow method for the Scenario 2 results shown in Table 8-6. Why are these proportions ...Intergalactic Software Company went public three months ago. You are a sophisticated investor who devotes time to fundamental analysis as a way of identifying mispriced stocks. Which of the following characteristics would ...Why would a company pay to have its public debt rated by a major rating agency (such as Moody’s or Standard and Poor’s)? Why might a firm decide not to have its debt rated?
Post your question