Sisters Corp. expects to earn $34 per share next year. The firm’s ROE is 10% and...

Sisters Corp. expects to earn $34 per share next year. The firm’s ROE is 10% and its plowback ratio is 40%. If the firm’s market capitalization rate is 8%, what is the present value of its growth opportunities?

Solutions

Expert Solution

The answer is as follows:

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Sisters Corp. expects to earn $4 per share next year. The firm’s ROE is 15% and...

Sisters Corp. expects to earn $4 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. a. Calculate the price with the constant dividend growth model. (Do not round intermediate calculations.) b. Calculate the price with no growth. c. What is the present value of its growth opportunities? (Do not round intermediate calculations.)

Solarpower Systems expects to earn $20 per share this year and intends to pay out $10...

Solarpower Systems expects to earn $20 per share this year and intends to pay out $10 in dividends to shareholders (so, Upper D 10 (D0=$10) and retain $10 to invest in new projects with an expected return on equity of 19%. In the future, Solarpower expects to retain the same dividend payout ratio, expects to earn a return of 19% on its equity invested in new projects, and will not be changing the number of shares of ordinary shares outstanding....

High-tech company expects to earn $65 per share at the end of the year and intends...

High-tech company expects to earn $65 per share at the end of the year and intends to pay out $35 in dividends to shareholders. The company’s net income is 500 million and its common share equity is $2,000 million A) Compute the future growth rate. B) If the investors’ required rate of return for High-tech’s stock is 18 percent, estimate the company’s common stock value. C) High-tech’s finance director is considering a change in the dividend policy and continue with...

A stock expects to pay a dividend of $3.72 per share next year. The dividend is...

A stock expects to pay a dividend of $3.72 per share next year. The dividend is expected to grow at 25 percent per year for three years followed by a constant dividend growth rate of 4 percent per year in perpetuity. What is the expected stock price per share 5 years from today, if the required return is 12 percent?

Greshak Corp. forecasts its dividends to be $4.00 per share next year, $4.50 per share in...

Greshak Corp. forecasts its dividends to be $4.00 per share next year, $4.50 per share in two years, and $5.00 per share in three years. After the third year, dividends are anticipated to grow at a constant sustainable rate of 4.0% per year. If Greshak’s cost of capital is 12.0% and its applicable tax rate is 30.0%, what is the estimated share price for the company's common equity? YOU MUST USE AT LEAST 4 DECIMAL PLACES IN ALL CALCULATIONS AND SHOW...

Corp. forecasts its dividends to be $2.25 per share next year, $2.75 per share in two...

Corp. forecasts its dividends to be $2.25 per share next year, $2.75 per share in two years, and $3.60 per share in three years. After the third year, dividends are anticipated to grow at a constant sustainable rate of 5.0% per year. If cost of capital is 16.0% and its applicable rate is 35.0%, what is the estimated share price for the company's common equity? YOU MUST USE AT LEAST 4 DECIMIL PLACES IN ALL CALCULATIONS AND SHOW ALL WORK...

Rump Electric Power Ltd expects to earn $20 per share this year and intends to pay...

Rump Electric Power Ltd expects to earn $20 per share this year and intends to pay out $8 per share in dividends to shareholders and retain $12 per share to invest in new projects with an expected return on equity of 20%. In the future, Rump Electric Power Ltd expects to retain the same dividend payout ratio, expects to earn 20% return on its equity invested in new projects, and will not be changing the number of ordinary shares outstanding....

Solarpower Systems expects to earn $2020 per share this year and intends to pay out $99...

Solarpower Systems expects to earn $2020 per share this year and intends to pay out $99 in dividends to shareholders (so,Upper D 0 equals $ 9D0=$9) and retain $1111 to invest in new projects with an expected return on equity of 1919%. In the future, Solarpower expects to retain the same dividend payout ratio, expects to earn a return of 1919% on its equity invested in new projects, and will not be changing the number of shares of ordinary shares...

ENN Inc. expects to earn $2 per share in year 1. The company has a policy...

ENN Inc. expects to earn $2 per share in year 1. The company has a policy of retaining 60 percent of its earnings and investing them at a return (R) of 20 percent. Stockholders in EG expect a return (K) of 15 percent on the stock. What price should ENN’s stock sell for? What is the premium for growth and the PE ratio The company has just come up with a new highly profitable product. As a result it...

The Clipper Sailboat Company is expected to earn $2 per share next year. The company will...

The Clipper Sailboat Company is expected to earn $2 per share next year. The company will have a return on equity of 17 percent and the company will grow 6 percent in the future. The company has a cost of equity of 14 percent. Given that information, answer the following questions. What is the value of the company's stock? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is the present value of the growth...

Subjects