Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Attached are the solutions to the following problem. The Pinnacle Corporation has a dividend payout ratio of 65%, will earn $1.25 per share, and have

image text in transcribed

Attached are the solutions to the following problem.

The Pinnacle Corporation has a dividend payout ratio of 65%, will earn $1.25 per share, and have a return on equity of 11%. The shareholders' required rate of return is 8%.

A) Calculate the company's growth rate for EPS.

B) Using the earnings model, what is the value of Pinnacle Corporations stock?

C) Construct a data table that shows how the growth rate and value of the stock will change if the ROE ranges from 10% to 30%, in one-percentage-point increments.

D) Using that data in the Data Table, create a scatter chart with straight lines to show the relationship between the value of the stock and ROE. At what point does the model break

down?

E)Using the constant-growth dividend discount model, calculate the value of the companys

stock.

DO NOT ANSWER ALL QUESTIONS. All is am asking for is how you get the information in the data table and the scatter chart. In other words, what formulas and steps do you take to get the information in the data table and the scatter plot. Like press this button to enter this into a scatter plot etc..Any thing will help. Thanks!

Microsoft Sa 11 A A E Wrap Text Copy Merge & Center $ % , 4 0 00 Conditional Format Cell Formatting as Table Styles Insert Format Part C: Data Table Part D: Scatter chart with ht lines Growth Rate Value Stock Value as ROE Rises Payout Ratio Required Return Growth Rate Value without Growth Value of Stock Constant Growth DDM Value 3.85% A 10 Value of Growth Opportunities3.95 19.58 B 10% 15% 19.58 D Retun on Equity only, pos 58-06 58 38 5 25-85 63 79 19 25 00 202 23 33 39 47 60 81 125 210 $25 cas ice 572 3388 33 3 4 4 4 5 5 5 6 6 7 7 7 88899900 Pub - Re Gr FS 11 12 13 14 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 6

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes

11th International Edition

1259094901, 9781259094903

More Books

Students also viewed these Finance questions

Question

d. Is it part of a concentration, minor, or major program?

Answered: 1 week ago