You just got done eating a Pizookie at BJ's. It was so amazing that you go home
Question:
You just got done eating a Pizookie at BJ's. It was so amazing that you go home and decide to value their stock to see if it could be a good investment. Assume you find the following pieces of information:
- Latest paid dividend: $3.50 per share
- You expect their dividend to grow by 15% for the first two years and then from year 3 into perpetuity, grow its dividend by 3.4% (terminal growth rate).
- Beta of 0.8
- Expected market return is 5.5% and the risk free rate is 2.3%.
- Current trading price = $201
1. If the FED announced an aggressive open market operation where they will buy back Treasury bonds, this will impact BJ's intrinsic value (IV) using the one-stage dividend growth model in the following way:
IV goes up since interest rates will likely go up
IV goes down since interest rates will likely go up
IV goes down since interest rates will likely go down
IV goes up since interest rates will likely go down
2. Using all of the original information from the case at the beginning of the quiz, what is the intrinsic value of BJ's using a two-stage dividend growth model? (make sure and build in a spreadsheet).
$306.18
$313.44
$223.43
$324.36
3. Using all of the original information from the case at the beginning of the quiz, what is the intrinsic value of BJ's using a two-stage dividend growth model if BJ's provided lower guidance for their year 1 and year 2 dividend growth rate to 10% (from 15%)? (make sure and build in a spreadsheet).
$274.34
$313.22
$280.30
$279.10
4. You would like to value BJ's using a relative valuation approach. If BJ's has an average 10 year PE ratio of 25.0 and their current EPS is $7.55, what is the intrinsic value of BJ's?
$188.75
$75.44
$200.43
$250.00
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill