Problem 4-08, Company X
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
What is the current stock price for company X? You are given an expected dividend and expected stock price, along with the market capitalization rate.
What is the current stock price for company X? You are given an expected dividend and expected stock price, along with the market capitalization rate.
Given company Y’s level dividend stream, determine the market capitalization rate for the firm.
Given a dividend growth rate and market capitalization rate, estimate company Z’s stock price.
What is Mr. Single, Ms. Double, and Mrs. Tripple’s expected rate of return?
Determine the stock price using the nominal cost of capital, and then redo the problem using the real discount rate and determine the stock price.
Determine the payout ratios for each firm and the expected growth rates for each stock. If investors require a certain return on each stock what is the value of each share?
Under what conditions will the market capitalization the EPS1/P0 ratio?
Calculate Z-prime’s stock price given that growth will eventually stop as the firm will pay out all its earnings as dividends.
Determine the stock price for each of the stocks given that the first stock pays a constant dividend forever, the second stock has a dividend that grows each year forever, and the third stock will grow for the next five years at a high growth rate but then stops growing.
Determine EPS and dividends for years 1 through 5 by filling out a grid of numbers. Finally, determine what the stock is worth. They also give you various estimates for ROE and the payout ratio.