ABC Technologies has been growing quite rapidly in recent years and has a growth potential of 27% from today till the end of year 3. Analysts estimate that the growth rate will decrease to 24% in year 4 and 5 after which it will stabilize at 10% thereafter. If the ROE is expected to remain constant at 30% annually, and the current Earning Per Share is S1.4, calculate the value of this stock. (Assume that shareholders require a 12% rate of return, Round off calculations to 2 decimal spaces).

ABC Technologies has been growing quite rapidly in recent years and has a growth potential of 27% from today till the end of year 3. Analysts estimate that the growth rate will decrease to 24% in year 4 and 5 after which it will stabilize at 10% thereafter. If the ROE is expected to remain constant at 30% annually, and the current Earning Per Share is S1.4, calculate the value of this stock. (Assume that shareholders require a 12% rate of return, Round off calculations to 2 decimal spaces).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

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