The earnings, dividends and stock price for Luna Enterprises…
The earnings, dividends and stock price for Luna Enterprises are expected to grow at 7% per year into the future. Luna’s common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the current year. The firm’s beta is 1.6, the risk-free rate is 9%, and the expected return on the market is 13%. What is the firm’s cost of equity by (a) the discounted cash-flow method, and (b) by the CAPM method.
Read DetailsA firm has a declining gross profit margin with slow but pos…
A firm has a declining gross profit margin with slow but positive revenue growth, their EBITDA margin is stable. The company operates in a fiercely competitive industry that is mature. What is the likely cause of this scenario?
Read DetailsYou’ve just done some analysis on a publicly traded company…
You’ve just done some analysis on a publicly traded company and some of your key findings are below. The company; Operates in a highly innovative and high growth industry which is expected to continue for the next 5 years before the industry matures The company is an industry leader with some of the best metrics relative to peers Has an ROE of 25% Operates in a world where long term GDP is approximately 4% Does not pay a dividend Given these considerations, what is the most appropriate sustainable growth rate (terminal value growth rate) to use for this company?
Read DetailsA company has a dividend payout ratio of 35%. The most recen…
A company has a dividend payout ratio of 35%. The most recent free cash flow was $2.15. Assuming free cash flows are expected to grow at 20% for the next 3 years before dropping to a long-term growth rate, what is the overall value of the firm? The discount rate for the firm is 15%.
Read Details