Use the following data to calculate your stock value.
Note the following:
ROE = NI / Total equityPayout ratio = total cash dividends / NIRecent total dividend payments were $55MillionThere are 10million shares outstanding.T-bill rate is 3.0%, S&P500 mkt return was 10.00%, and beta of this company is 1.5.equity beta of this company is 1.5.
Balance sheet (in millions) of 2020 and 2021
2020
2021
2020
2021
Current Assets
380
450
Current liabilities
150
200
Fixed Asset
600
500
Fixed Debt
380
250
Total equity
450
500
Total Asset
980
950
Total liabilities+equity
980
950
Income Statement (in millions) of 2021
Revenue
500
all expenses
-200
EBIT
300
Interest expense
-100
EBT
200
Tax
-90
NI =
110
YEARDIVIDEND per share2016$4.502017$4.902018$5.002019$5.102020$5.202021$5.50
FOR QUESTIONS #A - #C, You assume a constant perpetual growth model is appropriate for your stock valuation.
Question #A. Using the sustainable growth rate to estimate the growth rate, what should be the stock value per share?
Question #B. Using the arithmetic average growth rate to estimate the growth rate, what should be the stock value per share?
Question #C. Using the geometric average growth rate to estimate the growth rate, what should be the stock value per share?