to calculate stock price using P/E ratio :
stock price = multiple*expected level of earnings
to calculate stock price using dividend discount model
stock price = expected dividend/(required return- growth rate for dividend)
Question 9: (10 points). (Relative valuation of common stock) Using the P/E ratio approach to valuation,...
(Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • the investor's required rate of return is 13 percent, • the expected level of earnings at the end of this year (E1) is $4, • the firm follows a policy of retaining 30 percent of its earnings, • the return on equity (ROE) is 15 percent, and • similar shares of...
(Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock ur following conditions: • the investor's required rate of return is 12 percent, . the expected level of earnings at the end of this year (E) is $8, • the firm follows a policy of retaining 40 percent of its earnings • the return on equity (ROE) is 12 percent, and Similar shares of stock sell...
P10-12 (similar to) 3 Question Help (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • the investor's required rate of return is 14 percent, • the expected level of earnings at the end of this year (E1) is $7, • the firm follows a policy of retaining 20 percent of its earnings, . the return on equity (ROE) is 13...
P10-12 (similar to) Question Help (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions • the investor's required rate of return is 12 percent, • the expected level of earnings at the end of this year (E) is $8, • the firm follows a policy of retaining 40 percent of its earnings, • the return on equity (ROE) is 12 percent,...
(Common stock valuation) Assume the following the investor's required rate of return is 14.5 percent, the expected level of earnings at the end of this year (E1) is $14, the retention ratio is 45 percent, the return on equity (ROE) is 15 percent (that is, it can earn 15 percent on reinvested earnings), and similar shares of stock sell at multiples of 7.096 times eanings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price...
i need e & f 1. Determine the price rangs ratio (PE) c. What is the stock price using the PE ratio valuation method d. What is the stock price using the dividend discount model? e. What would happen to the PE (PE) and stock price if the company increased s ertion als gs in the form of dividends? 1. What you learned about the relationship between the retention and the PE rabios? the dyin 10 percent poding second What...
the investor's required rate of return is 13.5 percent the expected level of earnings at the end of this year (E1) s $6, the retention ratio is 40 percent, the return on equity (ROE) is 13 percent (that is, it can earn 13 percent on reinvested earnings), and similar shares of stocks sell at multiples of 7.228 times earnings per share Questions a. Determine the expected growth rate for the dividends. b. Determine the price earnings ratio (P/E1) c. What...
PLEASE ASSIST WITH E and F Setup: *the investor's required rate of return is14 percent •the expected level of earnings at the end of this year (Upper E 1E1) is $14, • the retention ratio is 35 percent, • the return on equity (ROE) is 16 percent (that is, it can earn 16 percent on reinvested earnings), and • similar shares of stock sell at multiples of 7.738 times earnings per share. a. Determine the expected grth rate tor dividends....
Assignment Stock Valuation 1. (Common stock valuation) Wayne, Inc.'s outstanding common stock is currently selling in the market for $33. Dividends of S2 30per share were paid last year, return on equity is 20 percent, and its retention rate is 25 percent. a. What is the value of the stock to you, given a 15percent requiredrate of rectum? b. Should you purchase this stock? 2. (Measuring growth) Thomas, Inc.'s return on equity is 13 percent and management has plans to...
Question #4: Stock Valuation and P/E Ratio [16 Points) The research analyst at Needham & Company believes that Tootsie Roll Industries has a return on equity (ROE) of 11% with a beta (B) of 0.60. Tootsie Roll Industries plans to maintain indefinitely its plowback ratio of 0.58. The firm's earnings this year (E.) were equal to $1.20 per share. The research analyst estimates that the expected return this year for the market E(r.) will equal 12.5% and T-bills will offer...