Question
1. You estimate Company B's Earnings per Share (EPS) over the next two years will be $2.00 next year and $2.80 the following year. The
1. You estimate Company B's Earnings per Share (EPS) over the next two years will be $2.00 next year and $2.80 the following year. The company will pay out 30% of the earnings as dividends and you expect Company B will sell at a P/E multiple of 22 in two years. The required rate of return for this stock is 9.6%.
A. What is your estimation of the Horizon Value or Price Target in 2 years?
Horizon Value =
2) What is your estimate of the intrinsic value of company YYY's common stock today using a 3-year investment horizon? You expect YVY to pay a $2.50 dividend at the end of next year and a $2.90 dividend the following year (Year 2), and a $3.20 dividend at the end of year 3. You expect YVY to sell for $190 at the end of year 3. You estimate YYY's required rate of return to be 9.2%.
A. Intrinsic Value Today =
B. If YYY's common stock is currently selling for $142 today, would you consider it a good investment based on the information given?
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