Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Domergue Corp. currently has an EPS of $2.10, and the benchmark PE for the company is 20. Earnings are expected to grow at 8 percent

image text in transcribed
image text in transcribed
Domergue Corp. currently has an EPS of $2.10, and the benchmark PE for the company is 20. Earnings are expected to grow at 8 percent per year. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the target stock price in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) C. Assuming the company pays no dividends. What is the implied return on the company's stock over the next year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Current stock price b. Target stock price C. Implied return of stock % Consider four different stocks, all of which have a required return of 20 percent and a most recent dividend of $4.00 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, o percent, and -5 percent per year, respectively. Stock Z is a growth stock that will increase its dividend by 20 percent for the next two years and then maintain a constant 10 percent growth rate thereafter What is the dividend yield and capital gains yield for each of these four stocks? (Leave no cells blank - be certain to enter "0" wherever required. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 1 decimal place, e.g., 32.1.) Stock W Stock X Stock Y Stock Z Answer is complete but not entirely correct. Dividend yield Capital gains yield 9 18 % Stock W 100 % 20.0 Stock x 0 % 26 3 % % Stock Y % 77% Stock Z 108 % -50 SIS

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

Applied International Finance

Authors: Thomas J O'Brien

1st Edition

1606497340, 9781606497340

More Books

Students also viewed these Finance questions