Target Corporation (TGT) NYSE- NYSE Delayed Price. Currency in USD Use the infor

Question

Target Corporation (TGT) NYSE- NYSE Delayed Price. Currency in USD Use the information about Target stock to answer the remaining questions. 29. 5 points. Assume the dividend in the table is Do 54.16-5.93 (-9.87%) According to the dividend and earnings (EPS) in the table, what is the payout ratio? Market Cap Beta PE Ratio (TTM) EPS (TTM) Earnings Date Forward Dividend & Yield Ex-Dividend Date ty Target Est 29.584B 0.41 10.94 4.95 Nov 20, 2017 2.48 (4.18%) 2017-11-14 60.48 Nov 14, 2017 30. 4 points. Assume that the company will continue with the same payout policy and that EPS in 1 year are expected to be $5.53, what is the expected dividend in 1 year? 31. 7 points. Given the 1-year target price and the dividend you calculated, calculate the value of the stock today. Assume a required return of 7.25%. 32. 4 points. Would you buy the stock at its current price? Is it overvalued or undervalued?

Explanation / Answer

29. Dividend Pay out Ratio = Dividend/Earning Per Share

Dividend= $ 2.48

Earning Per Share = $ 4.95

Dividend Pay Out = 2.48/4.95 = .5010 or 50.10%

30. Expected Payout = 50.10%

Expected EPS = $5.53

Expected Dividend = 5.53*.5010 = 2.77 $

31. Price Today = (Expected Price+Expected Dividend)/(1+ke)1

Where ke= Required Return = 7.25 %

So Price Today = (60.48+2.77)/(1+.0725)

= $58.97

32. Since Fair value is more than Actual Price, The Share is under Valued.

And the same should be bought.

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