Problem 3 Pro Build Inc. has had a net income of $16 million in its most...

Problem 3

Pro Build Inc. has had a net income of $16 million in its most recent year. Net income is expected to grow by 3% per year.

The firm always pays out 80% of net income as dividends and has 7 million shares of common stock outstanding. The required return is 9%.

Part 1

What is the current stock price?

Expert Solution

rate positively ..

	Net income =	16000000
	Dividend payment @ 80%	12800000
	Growth rate =	3%
	required rate=	9%

i	Equity value =	$ 219,733,333.33
	12.8mil*103%/(9%-3%)

ii	Total number of share =	7000000

iii=i/ii	Price per share =	$ 31.39

	ans =	$ 31.39

jeff jeffy answered 2 years ago

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