JWB1955
Nov 3, 2008, 04:41 PM
. You are analyzing a large, stable company. For the year ending 12/31/09 the
company reported earnings of $58,900K and book value at the end of 2009 was
$371,700K. You expect earnings to grow at 5% a year in perpetuity, and the
dividend payout ratio of 70% to continue. The company borrows at 8%, and has a
cost of equity of 12%. The company has 25,000K shares outstanding. What is your
estimate of price per share using the dividend discount model at 12/31/09?
A) $20.62
B) $21.65
C) $23.56
D) $24.74
company reported earnings of $58,900K and book value at the end of 2009 was
$371,700K. You expect earnings to grow at 5% a year in perpetuity, and the
dividend payout ratio of 70% to continue. The company borrows at 8%, and has a
cost of equity of 12%. The company has 25,000K shares outstanding. What is your
estimate of price per share using the dividend discount model at 12/31/09?
A) $20.62
B) $21.65
C) $23.56
D) $24.74