Question
Hi there, Please calculate the estimated share price using this formula: [DPS i.e, Do * Growth Rate/(Required Rate of Return - Growth rate)] . Scenario:
Hi there, Please calculate the estimated share price using this formula: [DPS i.e, Do * Growth Rate/(Required Rate of Return - Growth rate)] . Scenario: Kathy believes that Tech 1 technological advantage will only last for 5 years, after this period it is likely to slow down to the industry average and so the industry average required return will be a more appropriate rate for valuation. Tech 1: EPS= 0.35, Return on equity = 18%, required rate of return is 14%, share price is 3.31 per share, growth rate is 7.20%, dividend per share is 0.21. The other competitors required rate of returm is 7.75, 9.25, 9.00, 8.75%. Please calculate the estimated share price and show working. I and other classmates tried to calculate and we got $5.52 and 4.98 and 5.92 so not sure if we are wrong or who is right. Also calculate what is the current industry average price- earnings ratio using the estimation that you have calculated (esp) calculate tech 1 price earning ratio. Thank you in advance!
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