please help

You are trying to establish a value for the stock of a firm that announced

Earnings-per-Share of $3.72 for the recen

tly completed fiscal year. It seems

plausible to assume that earnings will

grow at about 1.45% per year into the

future, and that 9.75% is a reasonable

required return for the risk of this

investment. Apply the Gordon Growth Mode

l to the EPS to estimate a realistic

price for this stock.

FINC 490-01 Seminar in Finance Fall 2017 Homework #2 1. You are trying to establish a value for the stock of a firm that announced Earnings-per-Share of $3.72 for the recently completed fiscal year. It seems plausible to assume that earnings will grow at about 1.45% per year into the future, and that 9.75% is a reasonable required return for the risk of this investment. Apply the Gordon Growth Model to the EPS to estimate a realistic price for this stock. 2. You are trying to establish a value for the equity of a small firm. Recently, the EPS of the firm was reported as $2.13. You expect the earnings to grow at 25% per year for the next six years. After that, you expect earnings growth should level-off to a sustainable rate of 1.75% per year. If 11% is a reasonable required return on the investment, estimate a plausible price estimate for a share. 3. Consider the example above. Again, you are interested in projecting a value for this small firm. But, as an alternative approach, you are considering using a P/E ratio to project the terminal value of the venture. Therefore, your estimates of EPS for the next six years will remain the same. But, you will use an estimated P/E Ratio for this industry of 11.10 to compute the terminal value of the stock. In this case, what is the estimate for the value of the security? 4. You work at an investment bank that is considering buying all of the equity in a small privately-held enterprise. The target firm's recent earnings were $165,723,080, and it has 6,325,000 shares outstanding. Your boss has suggested that you use the comparative P/E Ratio for another similar firm to put a reasonable price on the stock. The comparative firm your supervisor has identified recently announced earnings of $491,249,047, and it has 5,345,000 shares outstanding. This firm's stock is selling at $874.30 per share. Use the comparable P/E ratio to estimate a reasonable price for the shares and overall equity of the target firm