Question
Dividends per share Company Zs earnings and dividends per share are expected to grow indefinitely by 5% a year. If next years dividend is $10
Dividends per share Company Zs earnings and dividends per share are expected to grow indefinitely by 5% a year. If next years dividend is $10 and the market capitalization rate is 8%, what is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Company Z-primes earnings and dividends per share are expected to grow by 5% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next years dividend is $10, the market capitalization rate is 8% and next years EPS is $15. What is Z-primes stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Stock price | $ |
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made at the beginning of 2016 are as follows: |
($ millions) | 2017 | 2018 | 2019 | 2020 | 2021 |
Net income | 1.0 | 3.8 | 6.8 | 7.3 | 7.6 |
Investment | 1.0 | 2.8 | 3.0 | 3.2 | 3.2 |
Free cash flow | 0 | 1.0 | 3.8 | 4.1 | 4.4 |
|
Phoenixs recovery will be complete by 2021, and there will be no further growth in free cash flow. |
a. | Calculate the PV of free cash flow, assuming a cost of equity of 10%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
Present value | $ million |
b. | Assume that Phoenix has 15 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Price per share | $ |
c. | What is Phoenixs P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
P/E ratio |
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started