Calculate Current Price Per Share for Cali Corporation
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Calculate the current price per share for Cali Corporation
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%
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Solution Summary
Given the sales, fixed and variable costs, tax rate, dividend payout rate, number of shares outstanding, beta, current rate on government T-Bonds, and expected return on the stock market, this solution illustrates how to derive the current price per share.
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1. Calculate the current dividend per share:
Total sales $120,000 ($12*10,000 units)
Variable costs 60,000 ($6*10,000 units)
Contribution margin $ 60,000 ($120,000-$60,000)
Fixed costs 10,000 ...
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