Question: Here is current information about Google: Price per share $ 2,582.69 P/E ratio (E=earnings per share estimated for next year): 19 Discount rate: 12% Assume

Here is current information about Google: Price per share $ 2,582.69 P/E ratio (E=earnings per share estimated for next year): 19 Discount rate: 12% Assume that the assumptions of our model in class apply to Google. a. Estimate the value (per share) of Google, attributed to its earnings from current assets and the value attributed to its PVGO. b. Google reinvests 30% of its earnings every year and pays out 70% of its earnings. What is the growth rate of Google's earnings as implied by its price? c. What is the return on investment on Google's projects? d.Google is considering paying more cash to its shareholders. Assuming that Google is going to change its policy and pay out 80% of its earnings, What should be the new price of Google? Is changing the policy a good idea? why?

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!

I need help understanding this project... Submit the Ratio Analysis portion of the final project. For this milestone, you will be analyzing the financial performance of Starbucks using the financial...

kindly assist me in this home work. Let me know if you need more information.Thank you KEY FINANCIAL STATEMENT RATIOS Liquidity ratios rev. 3-19-2010 rev. Feb 2010 Example: Current Ratio Current...

4) Corporate bonds for UCD Inc. have an annual yield to maturity of 12% and market value of $18,000. Preferred shares of UCD Inc. just paid a dividend of $1 per share and are expected to grow by 2%...

. : MANCOSA: HIGHER CERTIFICATE IN BUSINESS MANAGEMENT 41 PROJECT 7: ACCOUNTING AND FINANCE 1200 QUESTION 1 RATIO ANALYSIS TRANSFORMATION LTD Information extracted from the Statement of Comprehens...

Can anyone help solve/explain these study guide questions ? Thank you 1. Which one of the following statement is correct? a. Corporations face fewer regulations than proprietorships. b. One...

It was the end of the fourth quarter. The financial statements had been prepared and circulated to the directors of NuSkin Products Inc. (Tables 2 and 3). The firm's revenues had surpassed the...

A. Briefly, summarize the key fact of the case, identify the problem/decision and explain why it is important. Is It Much Ado About Nothing? It was the end of the fourth quarter. The financial...

Based on all the analysis you have carried out in response to the previous questions, what is your recommendation? In your opinion, should they pay dividends at all? Why or why not? If they decide to...

What does the composition of shareholder groups within a corporation have to do with dividend policy? Based on the majority shareholding groups and their relative proportions of ownership in the...

What are some drawbacks to following a strict residual dividend policy? What do firms typically do in practice? Is It Much Ado About Nothing? It was the end of the fourth quarter. The financial...

Using values from Appendix C, calculate the standard enthalpy change for each of the following reactions: (a) 2 SO2(g) + O2(g) 2 SO3(g) (b) Mg(OH)2 (s) MgO (s) + H2O(I) (c) N2O4(g) + 4 H2(g) N2(g)...

4.1.8. Recall that for the parameter 7 = g(0), the mle of n is g(0), where is the mle of 8. Assuming that the data in Example 4.1.6 were drawn from a Poisson distribution with mean A, obtain the mle...

Investigate the graphs of equations of the form y = 4x + c where c is an integer. What do you notice about all your graphs?

Which of the following is not true regarding the effectiveness of online learning? A. Online instruction is better than classroom instruction for procedural knowledge. B. Online learning is not...

LO10.4 Convey how purely competitive firms can use the total-revenuetotal-cost approach to maximize profits or minimize losses in the short run.

LO9.4 Use economies of scale to link a firms size and its average costs in the long run.

LO9.5 Give business examples of short-run costs, economies of scale, and minimum efficient scale (MES).