(8 pts) Company RR reported Revenues (Sales) of 200 million for 2017. You foreca
ID: 2783269 • Letter: #
Question
(8 pts) Company RR reported Revenues (Sales) of 200 million for 2017. You forecast that company RR will increase revenues by 10% next year (2018). You also forecast that RR will ha a Net Profit Margin of 6% in 2018. There are million shares of RR stock outstanding. You al forecast that Company RR will have a dividend payout ratio of 30% in 2018. a. What is your forecast for Revenues for 2018? 0 b. What is your forecast forNet income for 2018? Ni= X c. What is your forecast for Earnings per Share for 2018? EPS 20 S,20 1.b5 What is your estimation for RR's dividend per share at the end of 2018? Dividend per share05 If you estimate that RR will have a P/E multiple of 22 at the end of 2018, what is yo estimate of the stock price of RR at the end of 2018? e. Stock Price at end of 2018Explanation / Answer
Solution for E
Earnings in year 2018 = $200 million × ( 1 + 10%) × 6%
= $13.20 million.
Earnings per share in 2018 = $13.20 million / 8 million
= $1.65
Earnings per share in year 2018 will be $1.65.
P/E ratio in 2018 = 22.
Stock price in 2018 = 22 × $1.65
= $36.30.
Stock price in 2018 will be $36.30.
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