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.

Case 2: If the residual earnings are at 2015 level for 2016 and beyond, calculate the continuing value at the end of 2015 and value per share at the end of 2010.

Case 3. If the residual earnings will grow at 4% per year for 2016 and beyond, calculate the continuing value at the end of 2015 and value per share at the end of 2010.

Solutions

Expert Solution

ekkarill92 answered 9 months ago

Next > < Previous

Related Solutions

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...

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?

EPS(1) = $6 Dividends per share (1) =0 Book Value per share (0) =$12 Company XYZ...

EPS(1) = $6 Dividends per share (1) =0 Book Value per share (0) =$12 Company XYZ does not plan to pay any dividends in years 1, 2 ,or 3. It will set dividends equal to its earnings. Assume that the ROE will stay constant over time. The opportunity cost of capital is 20%. How much is Company ABC worth per share?

explain what earnings per share (EPS). How is EPS calculated and why it is important for...

explain what earnings per share (EPS). How is EPS calculated and why it is important for investors to gauge the value of a share?

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

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...

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...

Briefly explain what you understand by Earnings per share (EPS). How is EPS calculated and why...

Briefly explain what you understand by Earnings per share (EPS). How is EPS calculated and why it is important for investors to gauge the value of a share? Refer to the relevant web links that I have put on course website and use any other references that you like. (Your answer should not exceed 250 words) Why do firms buy back the shares from investors? What do they gain? Briefly explain the economics of such a decision and its effects...

Subjects