Question

A mature manufacturing firm just paid a dividend of $5.18 but management expects to reduce the payout by 4.54 percent per year, indefinitely. If you require a return of 6.33 percent on this stock, what will you pay for a share today? Answer to two decimals.

Answer 1

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? v L 1 04:12 ENG 22-02-2070 16 DW68 X fix DO DPDQ DR DS DE DU DVDW DXDY DZEA EB - DO 5.18 -4.54% 4.9448 [D1=D0*(1+g) = 5.18*(1-0.0454)] 6.33% D1 = ke = PO = ANSWER PO = D1/(ke-g) 4.9448/(0.0633 - (-0.0454)) = 45.49 year stock price A/B 1 } 46.27 48.51 54.32 58.12 EPS P/E B 2.29 20.20524 2.79 17.3871 3.32 16.36145 3.3 17.61212 HISTORICAL P/E 17.89148 EPS FOR NEXT YEAR 3.3*(1+0.08) = 3.564 MARKET PRICE FOR NEXT YEAR MARKET PRICE FOR NEXT YEAR ANSWER MARKET PRICE FOR NEXT YEAR HISTORICAL P/E X EPS FOR NEXT YEAR 17.89148 * 3.564 63.77 76 HIGH LOW TARGET PRICE STOCK DIV NAV HEDGE FUND MF EV PE EPS DIV ABNORMAL deberk MARGIN MONEY marginal tax PB ROPI APV R...