B) Calculate earnings and dividend growth rates for three companies ( Hit Edelman's EPS growth rate is 8%.
g Calculate dividend payout ratios for all three companies both yrs ( Edelman's 2007 payout ratio 50%.
h. Calculate debt/total assets ratios for all three companies (Edelman's 2007 debt ratio 55%0
i) Calculate P/E ratios for Kennedy and Strasburg for 2007. (Kennedy's P/E=8x)
j) Now determine a rage of values for Edelman's stock price, with 400,000 shares outstanding by applying Kennedy's and Strasburgs P/E ratios, price/dividends ratios, and price/book value ratios to your data for Edelman. For example one possible fprice of Edelman stock is (P/E Kennedey) (EPS Edelman)= 8($3)=24 per share. Similar calculations would produce a rage of prices based on both Kennedy's and Strasburg's data (hint rage 24 to 27)
k) Using the equation rS=D/1po+g, find the approximate rS values for Kennedy and Strasburg. Then use these values in the constant growth stock price medel to find a price of Edelman's stock (We averaged the EPS and DPS g's for Edelman)
The solution explains the calculation of various ratios