Question

Question 19 1 pts Suppose you are thinking about buying a share of Quack, Inc. You believe that BVR, Co. is a comparable company in terms of risk and as such can be used to help value Quack, Inc. If the earnings per share for Quack, Inc. is currently $2.00, the earnings per share for BVR is $3.00, and the price-to- earnings ratio for BVR is equal to 17.50, what is the price you would be willing to pay for Quack, Inc? • Report your answer as a whole number reported to two decimal places (i.e. 1.23). Do not include a dollar symbol in your response. Question 20 1 pts Darden Restaurants is expected to pay annual dividends of $1.90 and $2.10 over the next two years, respectively. After that, the company expects to pay a constant dividend of $2.30 a share. What is the value of this stock at a required return of 16 percent? • Hint: You will need to use general dividend discount model and the dividend discount model with no dividend growth to answer this question. $12.44 $14.60 $13.89 $13.30

Answer 1

Solo Assuming that BVR Co. is a comparable company in terms of risk & as such can be used to help value Quack Inc. P/E Ratiof of BVR Co. would be considered same for Quack Inc. P/E Ratio = 17.50 = Share Price Earning Per Share (CPs) 7 Share Price of Quack Inc. » Ple Ratio X EPS → 17.50 × $2 Answer 35

Q20 DI= $1.90 D2 = $2.10 Dy = $ 2.30 & 80 OM..... Ke = 16% P Price of stock) - DI + D2 + D3 + D4 . cirke) Cieker Citke) ke Citke) = 1.90 + 2.10 + 2.30 + 2.30 (10.16) CI+0:16) CI+0.16) 0,166110 1633 = 1.63 793 + 1.5606421 + a 1.4735126 +9.209454 - $13.89] (option: $13.89