1) Given the information below for HooYah! Corporation, compute the expected sha
ID: 2613267 • Letter: 1
Question
1)
Given the information below for HooYah! Corporation, compute the expected share price at the end of 2011 using price ratio analysis. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
57.50
Share Price
P/E=
P/CF=
P/S=
2)
JJ Industries will pay a regular dividend of $0.85 per share for each of the next four years. At the end of the four years, the company will also pay out a $79 per share liquidating dividend, and the company will cease operations. If the discount rate is 9 percent, what is the current value of the company’s stock? (Round your answer to 2 decimal places. Omit the "$" sign in your response.
4)
Joker stock has a sustainable growth rate of 12 percent, ROE of 16 percent, and dividends per share of $3. If the P/E ratio is 18.5, what is the value of a share of stock? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
5)
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.6, a debt-to-equity ratio of 0.4, a tax rate of 40 percent, and net income last year of $41 million. Assume a risk-free rate of 5 percent and a market risk premium of 12 percent. Included in net income was a depreciation expense of $5.1 million. In addition, Lauryn paid out $7.5 million in capital expenditures. Assume the company's FCF is expected to grow at a rate of 4 percent into perpetuity. What is the value of the firm? (Enter your answer in millions. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
8)Given the information below for StartUp.Com, compute the expected share price at the end of 2011 using price ratio analysis. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Share price $
Year 2005 2006 2007 2008 2009 2010 Price 21.0057.50
129.00 206.00 96.00 26.50 EPS -5.00 -4.29 -1.70 -.55 .04 .05 CFPS -12.00 -9.50 -2.70 -.10 .33 .20 SPS 18.00 26.50 24.60 28.10 31.60 34.95Explanation / Answer
Q4 Ans:
Based on a current dividend price of $3.00 and a growth rate of 12.000%, in order to earn your 16.000% required rate of return the most you could pay for this stock would be $84.00 per share.
Please note that the calculated price is based on the dividend growth model, which assumes that the dividends will always be paid and they will grow at a constant rate indefinitely. Rarely, if ever, is this the actual case.
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