Question: 1.) Use the constant growth dividend discount model and consider the following ABC stock is expected to have earnings of $7.00/share next year. The stock

1.) Use the constant growth dividend discount model and consider the following ABC stock is expected to have earnings of $7.00/share next year. The stock has a market capitalization rate, k, of 13%

If the firm has an ROE of 15% and a plowback ratio of 0.5, what is the intrinsic value of the stock?

2.)Use the constant growth dividend discount model and consider the following. ABC stock is expected to have earnings of \$8.00/share next year. The stock has a market capitalization rate, k, of 12%

What would be the value of the stock if its managers did not reinvest in the firm (i.e,b=0) and paid out all earnings in the form of dividends to shareholders (what is the no-growth value)?

Please show all work! Thanks

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Clarion Manufacturing Company is a publicly held company that is engaged in the manufacture of home and office furniture. The firms most recent income statement and balance sheet are found below. a....

Use the constant growth dividend discount model and consider the following: ABC stock is expected to have earnings of $6/share next year. The stock as a market capitalization rate of 10%. If the firm...

Use a constant growth dividend discount model and consider the following. ABC stock is expected to have earnings of $8/share next year. The expected return on the market is 12% and the one-year...

Which of the following statement is NOT correct about the constant growth dividend discount model ? a) Stock value is higher if its expected earnings per share is higher. b) Stock value is higher if...

Which of the following statement is NOT correct about the constant growth dividend discount model? a ) Stock value is higher if its expected earnings per share is higher. b ) Stock value is higher if...

Mike Brandreth, an analyst who specializes in the electronics industry, is preparing a research report on Dynamic Communication. A colleague suggests to Brandreth that he may be able to determine...

(50 points) Your neighbor, who is the CEO of Endless Summer Biotech (ESB), recently discussed some of his firm's current research projects with you while you were playing golf During your...

I have a big test tomorrow can anyone please solve this and explain this! Question 1 A stock offers an expected dividend of $3.50, has a required return of 14 percent, and has historically exhibited...

6. When can one not use the constant growth dividend discount model? . When the growth rate in dividends is zero. h. When the growth rate in dividends is negative. When the growth rate in dividends...

1. According to constant growth dividend discount model, we compute the intrinsic value of stock at time 0 (today's computed stock price), P0=D1/(k-g), where D1 is the expected dividend next year,...

JQT Corporation just paid a dividend of per share which represents 60% of its profit after $3.65 tax. Its return on shareholder's equity is expected to remain constant at 11% per annum for ever. JQT...

British American Tobacco (BAT) completed its buyout of the 57.8% of Reynolds American Inc. (Reynolds) that it did not already own on July 25, 2017, for $49.4 billion in cash and stock for full...

Most often open reduction of fracture is required in: A Closed fracture with nerve injury Compound fracture Fracture in children D Unsatisfactory closed reduction E Non union.

Write an equation for a line parallel to y = 5 x - 3 and passing through the point ( 3 , 1 9 ) y

The first scenario will be a Verbal Judo scenario in which your scenario follows the standard Verbal Judo interaction: You need to ask somebody to modify their behavior either to do something or to...

If the organization can offer a good quality of working life, can managers rely on that? Would that be enough to mitigate the work-related stress and trigger employee engagement in a sustainable way?

Does the work setting of the Agency (external, internal with/without the public) affect the perception of stress? Why/why not? Would it be possible to mitigate its effects in any possible way?

Do HRM managers also need to re-contextualize themselves in their role as HR managers? If so: How should they achieve semantic fit with multiple contexts in a multinational company or an...