Question: Answer/comment on each of the following items: 2 pgs 1.Explain why analysts' forecast of earnings-per-share growth typically underestimate the growth that an investor values if

Answer/comment on each of the following items:

2 pgs

1.Explain why analysts' forecast of earnings-per-share growth typically underestimate the growth that an investor values if a firm pays dividends.

2.The historical earnings growth rate for the S&P 500 companies has been around 8.5%. Yet the required growth rate for equity investors is considered to be about 10%. Can you explain the inconsistency?

3.The following formula is often used to value shares, whereValueofequity 0 is the value of equity at Time 0,Earn1is forward earnings at Time 1,ris the required rate of return (cost of capital),g is the expected earnings growth rate.

Valueofequity 0= Earn1/rg

Explain why this formula can lead to errors.

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 Accounting Questions!

The figure below depict a maze. STOP 0 1 2 north 3 4 5 12 west east south 6 7 B Write a description of the maze in FSP, which using deadlock analysis provided by LTSA, finds the shortest path out of...

Explain why analysts' forecasts of earnings-per-share growth typically underestimate the growth that an investor values if a firm pays dividends.

Explain why analysts forecasts of earnings-per-share growth typically underestimate the growth that an investor values if a firm pays dividends.

Examples 1, 2, 7 and 8 in Ch. 12 and example 1 in Ch. 13. For examples 1 and 2 in Ch. 12, assume the net cash flow is $2,000,000, the tax rate is 40% and the cost of common equity is 10% which is...

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

Can I get you to complete out a midterm I have? I've answered some of the questions and you did a similar one a couple of months ago. BFIN3321 MIDTERM EXAM SUMMER 2014 MULTIPLE CHOICE (2 points each)...

I need help from a Financial expert who is very familiar with exchange rate exposure & payout policy.I will adjust the price as you suggest. For some reason I am not able to do it here. Please be...

Dear Tutors, The second document contain the answers for the attached Question Hugo pdf. But i couldn't understand the answer for the first question. Specifically, the calculation of net assets and...

can any expert help me with the below assignment just only 2 questions ,please read the requirment word by word and be careful about the style of the reference(APA) , file 3.1 is for question...

In the case "H. J. Heinz M&A" what is the financial analysis of the case? Please explain the financials. Send only a word file with the tables of financials and the explanation of each financial. I...

just only 2 questions ,please read the requirment word by word and be careful about the style of the reference(APA) , file 3.1 is for question 2..BTW,please focus the every step FINANCE SPOTLIGHT...

What is a six-sigma process? Why should we reach 6 sigma levels? Explain briefly.

Which of the following hedge fund types is most likely to have a return that is closest to risk-free? a. A market-neutral hedge fund. b. An event-driven hedge fund. c. A long/short hedge fund.

8. Which of the following statements correctly assigns the InputBox functions return value to a String variable named strCity? a. String.TryParse(InputBox(strMSG, "City"), strCity) b. strCity =...

Create a Flash movie that uses motion animation to change a figure from a large size to a small size and back as it moves from the top to the bottom of the right side of the stage.

Matthewson SA began operations on January 2, 2021. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation...

Data analytics is the process of examining data sets in order to draw conclusions about the information they contain. If you havent completed any of the prior data analytics cases, follow the...

The currents iR(t), iL(t), and iC(t) in the circuit shown can be drawn as phasors in a phasor diagram. Show that iR(t) + iL(t) + iC(t) = iS(t).

Survey 10 of your peers with these questions. How many tracks do they have in their digital music collection? How many of these tracks did they download for free? How many of these tracks did they...

Bob believes that organizations 'can never explore too much' when it comes to delivering innovation. Is Bob correct? Please explain your reasoning. (up to 1500 characters).

2. Using a communication conflict you have been involved in, or a problem or phenomenon that you are familiar with, provide answers for a)d). a) Find the critical elements that existed (exist) as you...

5. What is meant by the statement, when we attribute a different meaning to a situation, the situation will consequentially change for us?

10. Using a conflict in your local community as your starting point, discuss how conflicts can be resolved using the following strategies: a) Making the cake bigger b) Providing compensation that is...