Bill’s Bakery has current earnings per share of $2.5. Current book value is $4.3
ID: 2772114 • Letter: B
Question
Bill’s Bakery has current earnings per share of $2.5. Current book value is $4.3 per share. The appropriate discount rate for Bill’s Bakery is 17 percent. Calculate the share price for Bill’s Bakery if earnings grow at 3.4 percent forever. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Bill’s Bakery has current earnings per share of $2.5. Current book value is $4.3 per share. The appropriate discount rate for Bill’s Bakery is 17 percent. Calculate the share price for Bill’s Bakery if earnings grow at 3.4 percent forever. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
Share price = earnings per share/(discount rate-gowth rate)
Share price = 2.5/(17%-3.4%)
Share price = 18.38
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