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Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 10% per year. Investors have a required return of 15% and the next dividend is expected to be $3. a. What is the value of a share? b. What price do you forecast for the stock next year? C. Calculate the dividend yield and the capital gain (loss) yield. Formula Sheet PV- FV (1+r) pr. -g 1 PVC or or F-c 6Y-1) ---1-6) of APR 1 EAR-1 -1 EAR-1 APR EPR-1 (FV - MV) Y7M FVMW Del P- D. D D D+P - 5 D (1+r) PVCCATS- IdT dur SIT YTM + + FVMV DU Pes 30 r D D (1+r)(1+r) D. + P + D PVCCATS - IdT 111+0.57 dur Financial Ratios Equity Multiplier = Total Assets / Total Equity Times Interest Earned = EBIT / Interest Inventory Turnover = Cost of Goods Sold / Inventory Total Asset Turnover = Sales / Total Assets Profit margin = Net Income / Sales Market-to-Book Ratio = Market Value per Share / Book Value per Share ROE = PM x TAT x EM