Question

In: Finance

Bill's Bakery has current earnings per share of $2.98. Current book value is $4.90 per share....

Bill's Bakery has current earnings per share of $2.98. Current book value is $4.90 per share. The appropriate discount rate for Bill's Bakery is 11 percent. Calculate the share price for Bill's Bakery if earnings grow at 3.8 percent forever. (Do not round intermediate calculations. Round your answer to 2 decimal places.) What is the share price

Solutions

Expert Solution

P0 = Current book value + [(EPS * (1 + g)] - (Current book value * Discount rate)] / (Discount rate - Growth rate)

P0 = $4.90 + [($2.98 * 1.038) - ($4.90 * 0.11)]/(0.11 - 0.038)

P0 = $40.38

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

QPM has sales per share of $48.08, earnings per share of $7.58, book value per share...
QPM has sales per share of $48.08, earnings per share of $7.58, book value per share of $20.59, and dividends per share of $3.84. You have determined that relevant market multiples for QPM would be a price/sales ratio of 3.6x, a P/E ratio of 22.8x, a price/book ratio of 8.7x, and a dividend yield of 2.22%. You calculate a QPM price per share based on each ratio, and then estimate the value as the simple average of these four prices....
Julie's Market Place has earnings per share of $.35, a book value of $2.10 per share,...
Julie's Market Place has earnings per share of $.35, a book value of $2.10 per share, and a market-to-book ratio of 3. What is the firm's price-earnings ratio?
A firm has a current book value per share of $21.10 and a market price per...
A firm has a current book value per share of $21.10 and a market price per share of $37.57. Next year's earnings are expected to be $5.60 per share and the expected earnings growth rate is 2.5 percent. What is the required rate of return on this stock? A. 14 percent B. 15 percent C. 16 percent D. 17 percent E. 18 percent
Fun Toys Co. reported a per-share book value of $3.5, earnings per share (EPS) of $2.3,...
Fun Toys Co. reported a per-share book value of $3.5, earnings per share (EPS) of $2.3, and dividend per share (DPS) of 0.85 in its balance sheet on December 31, 2010. In early 2011 analysts made the following forecasts for 2011~2015: EPS growth rate is 4.5%, and DPS growth rate is 2%. The required return for equity is 8.5% percent. Case 1: If the residual earnings are zero after 2015, calculate the value per share at the end of 2010....
Book value per share may not approximate market value per share because: a. the book value...
Book value per share may not approximate market value per share because: a. the book value excludes common equity. b. book values are based on replacement costs   c. book value is related to accounting values and market value is related to the future potential as seen by investors. d. investors do not understand book value.
Book value per share may not approximate market value per share because: a. the book value...
Book value per share may not approximate market value per share because: a. the book value excludes common equity. b. book values are based on replacement costs   c. book value is related to accounting values and market value is related to the future potential as seen by investors. d. investors do not understand book value.
Halliford Corporation expects to have earnings this coming year of $2.98 per share. Halliford plans to...
Halliford Corporation expects to have earnings this coming year of $2.98 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two​ years, the firm will retain 53% of its earnings. It will then retain 20% of its earnings from that point onward. Each​ year, retained earnings will be invested in new projects with an expected return of 22.69% per year. Any earnings that are not retained will be paid out as...
Company «Rho», during the last fiscal year, had book value per share €100, earnings per share...
Company «Rho», during the last fiscal year, had book value per share €100, earnings per share €10 and distributed €2 dividends per share. For the next 3 years the firm is expected to have a stable payout ratio and stable return on equity. From the 3rd year and onwards the firm is expected to distribute 50% of its earnings and to have a return on equity of 5%. The beta coefficient of the firm is 1.5, the return of the...
A company has an EPS of $2.40, a book value per share of $24.24,and a...
A company has an EPS of $2.40, a book value per share of $24.24, and a market/book ratio of 2.1×. What is its P/E ratio? Do not round intermediate calculations. Round your answer to two decimal places.
A company has an EPS of $2.40, a book value per share of $26.40, and a...
A company has an EPS of $2.40, a book value per share of $26.40, and a market/book ratio of 1.3×. What is its P/E ratio? Do not round intermediate calculations. Round your answer to two decimal places. _____ A firm has a profit margin of 5.5% and an equity multiplier of 1.6. Its sales are $260 million, and it has total assets of $78 million. What is its ROE? Do not round intermediate calculations. Round your answer to two decimal...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT