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    Sundanci, INC.

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    Helen Morgan, CFA, has been asked by Carroll to determine the potential valuation for Sundanci, INC., using the dividend discount model. Morgan anticipates that Sundanci's earnings and dividends will grow at 32 percent for two years and 13 percent thereafter. Calculate the current value of share of Sundanci stock using a two-stage dividend discount model and the data from the given below. Show your work.

    INCOME STATEMENT: 1999 2000
    Revenue $474 $598
    Depreciation 20 23
    Other Operating Costs 368 460
    Income Before Taxes 86 115
    Taxes 26 35
    Net Income 60 80
    Dividends 18 24
    EPS $0.714 $0.952
    Dividend Per Share $0.214 $0.286
    Common Shares Outstanding 84mil 84mil

    BALENCE SHEET:
    Current Assets $201 $326
    Net, PPE 474 489
    Total Assets 675 815
    Current Liabilities 57 141
    Long-term Debt 0 0
    Total Liabilities 57 141
    Shareholders Equity 618 674
    Total liab. & Equity 675 815
    Capital Expenditures 34 38

    REQUIRED RATE OF RETURN ON EQUITY = 14%
    GROWTH RATE OF INDUSTRY = 13%
    INDUSTRY P/E Ratio = 26

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    https://brainmass.com/business/accounting-for-corporations/157730

    Solution Preview

    Calculating current value using two-stage dividend discount model
    Helen Morgan, CFA, has been asked by Carroll to determine the potential valuation for Sundanci, INC., using the dividend discount model. Morgan anticipates that Sundanci's earnings and dividends will grow at 32 percent for two years and 13 percent thereafter. Calculate the current value of share of Sundanci stock using a two-stage dividend discount model and the data from the given below. Show your work.

    INCOME STATEMENT: 1999 2000 ...

    Solution Summary

    This solution is comprised of a detailed explanation to calculate the current value of share of Sundanci stock using a two-stage dividend discount model.

    $2.19