Unless otherwise stated, assume a required return (cost of equity) equal to 10% and a growth rate
Question:
Unless otherwise stated, assume a required return (cost of equity) equal to 10% and a growth rate of 7%.
a. What is the current earnings yield? ____ _________
b. What is the expected return on the market? _ _______
c. Given a 15 forward P/E, what is the market estimate for earnings growth in 2013? ___ ______
d. What is your estimate for the sustainable growth rate? __ ________
e. If earnings grow 7% in 2013, what is 2013’s expected dividend? _________
f. Using the DDM, a 2013 dividend of $1.60, a 7% growth rate, and a 10% required return, what is your estimate of the intrinsic value?
g. What is the intrinsic value of APIX if it grew 8% in 2013, 8% in 2014, and 7% every year after?
Company: APIX (APX)
Current price = $58.00 a share
2012 earnings = $3.625
Historical plowback ratio = 60%
ROE = 14%
Beta = 1.4
Risk free rate = 2%
Market risk premium = 6%
Forward P/E = 15
Financial Reporting Financial Statement Analysis and Valuation
ISBN: 978-0324302950
6th edition
Authors: Clyde P. Stickney