You buy a stock which has the following features: Price:500 EPS: 33.3 Payout ratio: 25% Projected EPS

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You buy a stock which has the following features:

Price:ϵ500

EPS: ϵ33.3

Payout ratio: 25%

Projected EPS growth: 15%

What will EPS have to be equal to in year 3 for you to get a 12% return on your investment? What will the share be worth then?

Related Book For answer-question

Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Posted Date: May 15, 2023 02:47 AM

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You buy a stock which has the following features: Price:500 EPS: 33.3 Payout ratio: 25% Projected EPS

Question:

Expert Answer:

To calculate the EPS in year 3 we need to use the dividend discount model DDM formula P D r g where ... View the full answer

Foundations of Financial Management

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