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This is the given data: Stone Meat Data Exhibit I Sales Stock In Millions Price Year Of Dollars EPS DPS Range 2002 60 0.560 0.30
This is the given data:
Stone Meat Data | ||||
Exhibit I | ||||
Sales | Stock | |||
In Millions | Price | |||
Year | Of Dollars | EPS | DPS | Range |
2002 | 60 | 0.560 | 0.30 | 6-10 |
2003 | 63 | 0.500 | 0.30 | 5-9 |
2004 | 68 | 0.710 | 0.35 | 5-10 |
2005 | 85 | 0.880 | 0.40 | 8-12 |
2006 | 97 | 0.820 | 0.45 | 9-14 |
2007 | 119 | 0.940 | 0.45 | 12-20 |
2008 | 130 | 1.110 | 0.45 | 11-18 |
2009 | 145 | 1.350 | 0.45 | 15-24 |
2010 | 164 | 1.300 | 0.50 | 17-27 |
2011 | 173 | 1.600 | 0.50 | 20-30 |
2012 | 180 | 1.750 | 0.60 | 24-32 |
Growth |
Exhibit II | |
Balance Sheet As of 12/31/2012 (figures in millions) | |
Cash | 20 |
Accounts Receivable | 10 |
Inventories | 30 |
Plant and Equipment, net | 60 |
Total Assets | 120 |
Accounts Payable | 20 |
Misc Accruals | 10 |
Preferred Stock (5%) | 10 |
Long term Debt | 24 |
Common Stock (2.5 million shares) | 12 |
Capital Surplus | 4 |
Retained Earnings | 40 |
Total Liabilities and Equity | 120 |
The firm's bonds carried a 6% coupon, | |
a 12/31/2022 maturity and were selling for | |
$960 as of 6/30/2012. | |
So this is my question:
a. With the data given, you can calculate up to four geometric growth rates to apply to the dividend model, which is more appropriate?
The dividend rate because the model is based on dividends. | |
The earnings rate because the dividend was stabilized and does not reflect the growth pattern of the company.b | |
The growth in share price | |
The growth in sales because it is almost like earnings. | |
You do not need the growth rate.
b. What is the cost of equity using the dividend growth model? (Decimal answer to the fourth decimal place)
c. What is the cost of equity using the CAPM? (Decimal answer to the fourth decimal place) Please label the answer A. B. and C. so I know what information goes to what question |
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