Question
#13) Bill's Bakery expects earnings per share of $2.56 next year. Current book value is $4.70per share. The appropriate discount rate for Bill's Bakery is
#13) Bill's Bakery expects earnings per share of $2.56 next year. Current book value is $4.70per share. The appropriate discount rate for Bill's Bakery is 11 percent. Calculate the share price for Bill's Bakery if earnings grow at 3 percent forever.
P0= $4.70 + [$2.56-($4.70 x 0.11)]/ (.11-0.03) =$30.24
When i calculate this above formula, I get $84.29. How is the above calculated with steps to get $30.24?
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Numerical Analysis
Authors: Richard L. Burden, J. Douglas Faires
9th edition
538733519, 978-1133169338, 1133169333, 978-0538733519
