Question
1-a. Roller Burger Drive-in is expected to pay a $1.20 dividend next year. The dividends are expected to grow at a rate of 5%. If
1-a. Roller Burger Drive-in is expected to pay a $1.20 dividend next year. The dividends are expected to grow at a rate of 5%. If the required return is 8%, what is the price of the stock?
1-b. The PE ratios for the fast food industry are as follows:
McDonalds | 26.4 |
| Yum | 23.88 |
Jack in the Box | 18.41 |
| Dominos Pizza | 32.42 |
If Roller Burger Drive-in has an Earnings per Share of $2. What would be the highest, lowest and average price that you would expect for Roller Burger stock?
1-c. Given your answers in Questions 1-a and 1-b are different, what would you actually expect the price of Roller Burger stock to be? Why?
2. Your online credit card summary says that your current balance is $1200, but your statement balance is only $800. Your minimum payment is $40 and your annual interest rate is 20%. If you only pay the minimum payment, how much interest will you own NEXT month? (notice I gave you an annualized interest rate so you will have to divide by 12)
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