Stock Price: Common Stock Value
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XYZ company has had the following pattern of earnings per share over the last five years:
2000........$3.00
2001......... 3.18
2002......... 3.37
2003......... 3.57
2004......... 3.78
The earnings per share have grown at a constant rate (on a rounded basis) and will continue to do so in the future. Dividends represent 30% of earnings.
a. Project earnings and dividends for the next year (2005). Round all values in this problem to two places to the right of the decimal point.
b. If the required rate of return (Ke) is 10 percent, what is the anticipated stock price at the beginning of 2005?
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Solution Summary
This solution projects earnings and dividends for the next year, and calculates the anticipated stock price. An Excel document also accompanies the solution.
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Please view the attached Excel document for proper formatting.
XYZ company has had the following pattern of earnings per share over the last five years:
2000........$3.00
2001......... 3.18
2002......... 3.37
2003......... 3.57
2004......... 3.78
The earnings per share have grown at a constant rate (on a rounded basis) and will ...
Purchase this Solution
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