Question
Beasley Ball Bearings paid a $4 dividend last year. The dividend is expected to grow at a constant rate of 5 percent over the next
Beasley Ball Bearings paid a $4 dividend last year. The dividend is expected to grow at a constant rate of 5 percent over the next four years. The required rate of return is 15 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
g. If current EPS were equal to $5.51 and the P/E ratio is 20% higher than the industry average of 7, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
h. By what dollar amount is the stock price in part g different from the stock price in part f? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
i. With regard to the stock price in part f, indicate which direction it would move if:
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