Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Johnson Products earned EPS exist4.35 last year and paid a exist1.70 per share dividend. Its ROE was 17 percent. Beta for the firm is 1.2

image text in transcribed
Johnson Products earned EPS exist4.35 last year and paid a exist1.70 per share dividend. Its ROE was 17 percent. Beta for the firm is 1.2 while risk-free rate is 2.5% and market premium is 85%. What is the sustainable growth rate? (2) What is the discount rate k? (3) Suppose the dividend grows at the sustainable growth rate forever, what is the current stock price? Notice that exist1.70 is D_0) Lauryn's Doll Co. had E8IT last year of exist60 million, which is net of a depreciation expense of exist6 million. In addition, Lauryn made exist5.55 million in capital expenditures and increased net working capital by exist2.3 million. Assume that Lauryn has a reported equity beta of 1.8, a debt-to equity ratio of 3, and a tax rate of 30 percent. (1) What is Lauryn's FCF for the year? (2) What is Lauryn's Doll Co.'s Assets Beta for the year? (3) During the time, the risk-free rate is 3% while the market risk premium is 9%. what is k? (4) Suppose Lauryn's Doll Co. have a constant perpetuity FCF growth rate of 3%, what is the firm value today

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

The Repo Handbook

Authors: Moorad Choudhry

1st Edition

0750651628, 978-0750651622

More Books

Students also viewed these Finance questions

Question

Compare the different types of employee separation actions.

Answered: 1 week ago

Question

Assess alternative dispute resolution methods.

Answered: 1 week ago

Question

Distinguish between intrinsic and extrinsic rewards.

Answered: 1 week ago