Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2019. Also assume that the firm's equity beta is 1.60, the risk-free rate is 2.50 percent, and the market risk premium is 6 percent. Dividends per share Return on equity Book value per share $ 2.40 8.50% $19.75 2019 value per share Average price multiple Forecasted growth rate Earnings $ 5.00 13.10 13.66% Cash Flow $ 6.40 9.60 11.23% Sales $25.65 2.54 7.07% a. What are the sustainable growth rate and required return for Beagle Beauties? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Sustainable growth rate Required return % % b. Using these values, estimate the current share price of Beagle Beauties stock according to the constant dividend growth model. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Share price Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2019. Also assume that the firm's equity beta is 1.60, the risk-free rate is 2.50 percent, and the market risk premium is 6 percent. Dividends per share Return on equity Book value per share $ 2.40 8.50% $19.75 2019 value per share Average price multiple Forecasted growth rate Earnings $ 5.00 13.10 13.66% Cash Flow $ 6.40 9.60 11.23% Sales $25.65 2.54 7.07% a. What are the sustainable growth rate and required return for Beagle Beauties? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Sustainable growth rate Required return % % b. Using these values, estimate the current share price of Beagle Beauties stock according to the constant dividend growth model. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Share price
Expert Answer:
Answer rating: 100% (QA)
a To calculate the sustainable growth rate SGR we can use the formula SGR Return on Equity ROE Reten... View the full answer
Related Book For
Fundamentals Of Investments Valuation And Management
ISBN: 9781266824012
10th Edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
Posted Date:
Students also viewed these finance questions
-
Consider the 2017 Financial Statements of 305 Memorial Hospital, which are provided in the appendix. The following transactions (k represents thousands of dollars) occurred in January 2018. a. The...
-
The following information is available for Marigold's Hot Dogs: Actual production Budgeted production Standard direct labor hours Actual direct labor hours Standard variable overhead rate Actual...
-
A person pulls a toboggan for a distance of 35.0 m along the snow with a rope directed 25.0 above the snow. The tension in the rope is 94.0 N. (a) How much work is done on the toboggan by the tension...
-
The Game Place is a retail store that sells computer games, owned by Matt Huffman. On December 31, 2019, the firm's general ledger contained the accounts and balances below. All account balances are...
-
True or False: The following annual cash flows in years 1 thru 7, respectively, have a single real positive-valued root: \(-\$ 100,+\$ 15,-\$ 25,+\$ 75,-\$ 10,+\$ 50\), \(+\$ 50\).
-
Padillio Company had the following transactions involving notes payable. July 1, 2014 Borrows $60,000 from Fourth National Bank by signing a 9-month, 8% note. Nov. 1, 2014 Borrows $50,000 from...
-
1. What is the selection bias in the regressions? When will the bias occur? 2. Please explain why the random assignment could be used to address. the selection bias problem.
-
Allison's cottage was available for rental from May 1 to September 30. Allison's sister used the cottage for the last 14 days of April. The person who rented the cottage for August allowed Allison to...
-
1) Explain in detail the crystallization of a pure metal of your selection. Your explanation should include Mechanism Cooling curve Kinetics 2) Compare the selected pure metal in (1) with one of its...
-
Discusses the following organizational concepts: Organizational mission: the organization's mission and purpose, stated in terms of benefits to customers, employees, and society Organizational...
-
Consider the definition of work ethic, does a work ethic reflect the stereotypical expectation of Generation X? Is the work ethic generationally founded, formed by the timeframe and events of...
-
Every team member will answer the following questions for their decision making in the specific quarter, starting with your name, followed by your explanations on the next line. 1. What changes...
-
Preparation is the key to a Successful Negotiation, in the reading Control the Negotiation Before it Begins , the author asserts that four strategies set the stage for a successful negotiation. Take...
-
1. Compute the 99%, 1-day value-at-risk for this financial institution under these assumptions, based on delta normal. 2. Assume daily changes in interest rate are both normally distributed and...
-
Graph the following conic sections, labeling vertices, foci, directrices, and asymptotes (if they exist). Give the eccentricity of the curve. Use a graphing utility to check your work. 10 5 + 2 cos 0
-
You deposit $100,000 cash in a brokerage account and short sell $200,000 of stocks on margin. Later, the value of the stocks held short rises to $250,000. What is your account margin in percent? a....
-
a. If all else stayed the same, but the labor force participation rate declined, what would happen to the unemployment rate? b. What is the Goldilocks scenario with regard to economic conditions?
-
Two years ago, you invested $750,000 with a market-neutral hedge fund manager. The fee structure is 2/20, and the fund has a high-water mark provision. Suppose the first year the fund manager lost 10...
-
We can make a static measurement to deduce the spring constant to use in the model. If a \(61 \mathrm{~kg}\) woman stands on a low wall with her full weight on the ball of one foot and the heel free...
-
A \(1.00 \mathrm{~kg}\) block is attached to a horizontal spring with spring INT constant \(2500 \mathrm{~N} / \mathrm{m}\). The block is at rest on a frictionless surface. A \(10.0 \mathrm{~g}\)...
-
If, during a stride, the stretch causes her center of mass to lower by \(10 \mathrm{~mm}\), what is the stored energy? A. \(3.0 \mathrm{~J}\) B. \(6.0 \mathrm{~J}\) C. \(9.0 \mathrm{~J}\) D. \(12...
Study smarter with the SolutionInn App