Question
a) What elements are involved in calculating the present value of a cash flow that will be received at some point in the future? What
a) What elements are involved in calculating the present value of a cash flow that will be received at some point in the future? What does present value tell you about a cash flow to be received in the future? How could this be useful to a manager or business?
b) Value one share of a growth stock give the following assumptions Last 12mos EPS = $3.00 (D0) Plowback = 40% (hint: this is how much of the EPR the company re-invests to the organization. They would then distribute 60% in dividends to their owners). ROE = 20% Growth rate = 5% (assume that this is the constant growth rate from now forward) a). How much of the $3.00 EPS are reinvested into the company? b). What is next years EPS expected to be?/
c). What is next years dividend (D1) expected to be?
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