Use the following information to answer Problems 2731 Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous Below you will find selected information necessary to compute some valuation estimates for the firm Assume the values provided are from year end 2015 Also assume that the firms equity beta is 1 40, the risk free rate is 2 75 percent, and the market risk premium is 7 percent Dividends per share $ 2 04 Return on equity 9 50 Book value per share $17 05 Earnings Cash Flow Sales 2015 value per share $5 00 $6 60 $25 65 Average price multiple 13 10 9 42 2 36 Forecasted growth rate 13 48 11 41 7 34 Constant Perpetual Growth Model (LO1, CFA6) What are the sustainable growth rate and required return for Beagle Beauties Using these values, estimate the current share price of Beagle Beauties stock according to the constant dividend growth model Price Ratios (LO4, CFA8) Using the P E, P CF, and P S ratios, estimate the 2016 share price for Beagle Beauties Residual Income Model (LO3, CFA9) Assume the sustainable growth rate and required return you calculated in Problem 27 are valid Use the clean surplus relationship to calculate the share price for Beagle Beauties with the residual income model Clean Surplus Dividend (LO3, CFA9) Use the information from Problem 29 and calculate the stock price with the clean surplus dividend Do you get the same stock price as in Problem 29 Why or why not Stock Valuation (LO1, LO3, LO4) Given your answers in Problems 2730, do you feel Beagle Beauties is overvalued or undervalued at its current price of around $82 At what price do you feel the stock should sell

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Use the following information to answer Problems 2731. Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make

Use the following information to answer Problems 2731.Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firms equity beta is 1.40, the risk-free rate is 2.75 percent, and the market risk premium is 7 percent.

Dividends per share $ 2.04

Return on equity 9.50%

Book value per share $17.05

Earnings Cash Flow Sales

2015 value per share $5.00 $6.60 $25.65

Average price multiple 13.10 9.42 2.36

Forecasted growth rate 13.48% 11.41% 7.34%

Constant Perpetual Growth Model (LO1, CFA6) What are the sustainable growth rate and required return for Beagle Beauties? Using these values, estimate the current share price of Beagle Beauties stock according to the constant dividend growth model.
Price Ratios (LO4, CFA8) Using the P/E, P/CF, and P/S ratios, estimate the 2016 share price for Beagle Beauties.
Residual Income Model (LO3, CFA9) Assume the sustainable growth rate and required return you calculated in Problem 27 are valid. Use the clean surplus relationship to calculate the share price for Beagle Beauties with the residual income model.
Clean Surplus Dividend (LO3, CFA9) Use the information from Problem 29 and calculate the stock price with the clean surplus dividend. Do you get the same stock price as in Problem 29? Why or why not?
Stock Valuation (LO1, LO3, LO4) Given your answers in Problems 2730, do you feel Beagle Beauties is overvalued or undervalued at its current price of around $82? At what price do you feel the stock should sell?