ACC MCQ
ACC305 Chapter 1
You are analyzing a large stable company. For the year ending 12/31/05 the company reported earnings of $58,900K and book value at the end of 2005 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 12/31/05?
You are analyzing a large stable company. For the year ending 12/31/05 the company reported earnings of $58,900K and book value at the end of 2005 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 12/31/05?
You are analyzing a large stable company. For the year ending 12/31/05 the company reported earnings of $58,900K and book value at the end of 2005 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 12/31/05?
A. $20.62
B. $21.65
C. $23.56
D. $24.74
Answer: D
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