In: Finance
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.)
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