Solve for the estimated EPS and the stock price. constant growth model P=D1/(Kg) Example 1 Example 2
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Solve for the estimated EPS and the stock price.
constant growth model | P=D1/(Kg) | |||||
Example 1 | Example 2 | Example 3 | Example 4 | Example 5 | Example 6 | |
D1 | 2.05 | 4.1 | 1.25 | 2.15 | 6.35 | 2.25 |
k | 11% | 15% | 8% | 18% | 12% | 13% |
gram | 9% | 10% | 5% | 10% | 5% | 8% |
P= | 0.041 | 0.205 | 0.0375 | 0.172 | 0.4445 | 0.1125 |
Calculating D1 = | (1+g) * D0 | |||||
D0 | 2.25 | 3.75 | 1.25 | 1.5 | 4.25 | 2 |
D1 | 2.43 | 4.125 | 1.3125 | 1.65 | 4.4625 | 2.16 |
k | 13% | 15% | 8% | 18% | 12% | 13% |
gram | 8% | 10% | 5% | 10% | 5% | 8% |
P= | 0.1215 | 0.20625 | 0.039375 | 0.132 | 0.312375 | 0.108 |
zero growth model | P=Do/K | |||||
D0 | 1.5 | 5 | 2 | |||
k | 15% | 5% | 10% | |||
P= | 10 | 100 | 20 | |||
P/E ratio model | Stock price = Estimated EPS x Expected P/E | |||||
earnings per share growth | 20% | 15% | 10% | 25% | 10% | |
EPS of recent years | $ 2.25 | $ 3.00 | $ 1.75 | $ 0.25 | $ 4.10 | |
Expected P/E ratio | 5 | 20 | 15 | 10 | 28 | |
Estimated EPS | ? | ? | ? | ? | ? | |
Stock price = | ? | ? | ? | ? | ? | |
CAPM | RRR= RFR + (Beta x (Market Return - RFR)) | |||||
Risk-free rate | 5,5% | 3,5% | 2,5% | 4,5% | 5,5% | |
BETA | 1.30 | 2.00 | 1.25 | 2.50 | 0.75 | |
market return | 15% | 13% | 14% | 11% | 10% | |
Risk-free rate | 5,5% | 3,5% | 2,5% | 4,5% | 5,5% | |
RRR | 17,85% | 22,50% | 16,88% | 20,75% | 17,13% |
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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