You have been given the following projections for Cali Corporation for the coming year.
Sales = 10,000 units
Sales price per unit = $12
Variable cost per unit = $6
Fixed costs = $10,000
Long-term debt = $15,000
Interest rate on long-term debt = 8%
Tax rate = 40%
Dividend payout ratio = 60%
Expected long-term growth rate = 8%
Shares of common stock outstanding = 10,000 shares
Beta = 1.4
Current rate on government T-Bonds = 5%
Expected return on the stock market = 9%
Calculate the current price per share for Cali Corporation.© BrainMass Inc. brainmass.com October 10, 2019, 1:15 am ad1c9bdddf
First, we need to calculate the earnings per share and dividend paid per share.
Sales (10,000 units x $12) 120,000
Less: Variable cost (10,000 units x $6) 60,000
Total Contribution Margin 60,000
Less: Fixed costs 10,000
Earnings before ...
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