Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Calculate the value of the following two stocks: Acorn tech and Lime media acorn has reported earnings per share of 80p and has a dividend

Calculate the value of the following two stocks: Acorn tech and Lime media

acorn has reported earnings per share of 80p and has a dividend payout of 40% and the dividend has just been paid. Acorn weighted average cost of capital is 9% and they have 25% debt in their capital structure. The tax rate is 30%. Acorns dividend are growing at 4% per year.

Lime has grown its dividend steadily over the years. In 2010 was 8p and in 2020 it was 19p. The company faced a tax rate of 30% as well, the risk free rate of interest was 2% and the market premium was 6%. Lime has no debts and its beta is 1.8. Its payout ratio is lower at 30%.

what are the share prices of Acorn and Lime?

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: E Thomas Garman, Raymond Forgue

11th Edition

1111531013, 9781111531010

More Books

Students also viewed these Finance questions

Question

1. To gain knowledge about the way information is stored in memory.

Answered: 1 week ago