Bill’s Bakery expects earnings per share of $2.82 next year. Current book value is $4.70 per...
Bill’s Bakery expects earnings per share of $2.82 next year. Current book value is $4.70 per share. The appropriate discount rate for Bill’s Bakery is 8 percent. Calculate the share price for Bill’s Bakery if earnings grow at 3.10 percent forever. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Homework Answers
we have to use residual value approach to compute share price -
| BV+(Earning-BV*ROE)/(ROE-Growth) |
| =4.7+(2.82-4.7*8%)/(8%-3.1%) |
| 54.58 |
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