Question
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find
Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2019. Also assume that the firms equity beta is 1.40, the risk-free rate is 2.75 percent, and the market risk premium is 7 percent.Dividends per share $ 2.04Return on equity 9.50%Book value per share $17.05 Earnings Cash Flow Sales2019 value per share $ 5.00 $ 6.60 $25.65Average price multiple 13.10 9.42 2.36Forecasted growth rate 13.48% 11.41% 7.34% 27. Constant Perpetual Growth Model (LO1, CFA6)What are the sustainable growth rate and required return for Beagle Beauties? Using these values, estimate the current share price of Beagle Beauties stock according to the constant dividend growth model. 28. Price Ratios (LO4, CFA8)Using the PE, P/CF, and P/S ratios, estimate the 2020 share price for Beagle Beauties. 29. Residual Income Model (LO3, CFA9)Assume the sustainable growth rate and required return you calculated in Problem 27 are valid. Use the clean surplus relationship to calculate the share price for Beagle Beauties with the residual income model. 30. Clean Surplus Dividend (LO3, CFA9)Use the information from Problem 29 and calculate the
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