Question
No mark will be given if you skip the steps Tom works in XYZ company. To evaluate common stock value of ABC Company.,Tom use Constant
No mark will be given if you skip the steps
Tom works in XYZ company.
To evaluate common stock value of ABC Company.,Tom use Constant Perpetual Growth Model for the evaluation and obtains the following information related to ABC Company and market: ABC Company Latest dividend per share paid: $1.5 Earnings per share: $2.0 Book value per share: $12.5 Asset beta: 1.2 Debt-to-equity ratio: 60% Tax rate: 25% Existing share price of common stock: $20
Market
Risk-free rate: 2% Market risk premium: 8%
(a) Calculate the following figures: i. Sustainable growth rate. ii. Appropriate discount rate. iii. Justified value per share.
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