Question

In: Finance

Consider the following per share information for Marlow Company: Year 1 2 3 Beginning BV 70...

Consider the following per share information for Marlow Company:

Year 1 2 3
Beginning BV 70 76 82
Net income 10 11 12
Dividends 4 5 6
Ending BV 76 82 88

The required return on equity is 12% , and Marlow's trailing PE ratio at the end of year 3 should be 12.0.

Using the residual income model, what is Marlow’s current value per share? (Enter an amount to the nearest $0.01. Leave the $ sign off.)

Solutions

Expert Solution

Formula used for value of stock:

Value of stock = beginning book value + present value of all residual values discounted at the required return on equity


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