Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Financial analysts forecast Limited Brands (LTD) growth rate for the future to be 9.5 percent. LTD's recent dividend was $0.40. What is the value of
Financial analysts forecast Limited Brands (LTD) growth rate for the future to be 9.5 percent. LTD's recent dividend was $0.40. What is the value of Limited Brands stock when the required return is 11.5 percent? (Round your answer to 2 decimal places.) Value of stock Suppose that a firm's recent earnings per share and dividend per share are $3.00 and $2.00, respectively. Both are expected to grow at 10 percent. However, the firm's current P/E ratio of 29 seems high for this growth rate. The P/E ratio is expected to fall to 25 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Years Dividends First year Second year Third year Fourth year Fifth year Compute the value of this stock in five years. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price Calculate the present value of these cash flows using a 12 percent discount rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value
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