Question
A company is expected to have earnings of $3.55 per share next year, $4.16 in two years, and $5.34 in three years. The dividend payout
A company is expected to have earnings of $3.55 per share next year, $4.16 in two years, and $5.34 in three years. The dividend payout ratio is expected to remain at 30% over the next three years. You estimate the risk-free rate to be 5% per year and the expected market risk premium to be 5% per year. In two years, you expect the lagging PE ratio to be 24. The beta of the stock is 0.9. What would be an appropriate estimate of the stock price today?
Step by Step Solution
3.39 Rating (146 Votes )
There are 3 Steps involved in it
Step: 1
The stock price today is the Present Value of Future Cash flows ie Present val...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Accounting concepts and applications
Authors: Albrecht Stice, Stice Swain
11th Edition
978-0538750196, 538745487, 538750197, 978-0538745482
Students also viewed these Finance questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App