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

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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

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