18) You have collected the following information regarding Impi Industrial Corporation's historicalearnings per shareR 12.36R 13.60201220132014201520162017Based on your analysis of Impi's fundamentals you estimate that the firm's earnings will continue togrow at its average historical growth rate for the next year but that in the following year, as a result ofthe launch of a new product the firm is currently developing, earnings will grow at a rate of 20% peryear for two years. After this, you project that the earnings growth rate will decrease by 5% per year forthe next two years, to its long-term sustainable rate. You project that the firm will maintain a 50%dividend pay-out ratio and that the appropriate market capitalisation rate for Impi Industrial Corporationis 15%. What action would you take if the firm's shares are currently trading at R620 per share?R15.82R 17.80R 20.90R21. 78

Intrinsic Stock Price is determined by computing present value(PV) of all future benefits that will…

Answered: 18) You have collected the following…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 19PC

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18) You have collected the following information regarding Impi Industrial Corporation’s historical earnings per share 2012 R 12.362013 R 13.602014 R15.822015 R 17.802016 R 20.902017 R21. 78Based on your analysis of Impi’s fundamentals you estimate that the firm’s earnings will continue to grow at its average historical growth rate for the next year but that in the following year, as a result of the launch of a new product the firm is currently developing, earnings will grow at a rate of 20% per year for two years. After this, you project that the earnings growth rate will decrease by 5% per year for the next two years, to its long-term sustainable rate. You project that the firm will maintain a 50% dividend pay-out ratio and that the appropriate market capitalisation rate for Impi Industrial Corporation is 15%. What action would you take if the firm’s shares are currently trading at R620 per share?
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You have collected the following information regarding Impi industrula Corporation's historical earnings per share. 2012 =R12.36 2013= R13.60 2014 =R15.82 2015= R17.80 2016= R20.90 2017 = R21.78 Based on your analysis of Impu's fundamentals you estimate that the firm's earnings will continue to grow at its average historical growth rate for the next year but that in the following year, as a result of the launch of a new product the form is currently developing, earnings will grow at a rate of 20% per year for two years. After this, you project that the earnings growth rate will decrease by 5% per year for the next two years, to its long term sustainable rate. You project that the firm will maintain a 50% dividend pay-out ratio and that the appropriate market capitalization rate for Impi Industrial Corporation is 15%. What action would yoh take if the firm's shares are currently trading at R620 per share?
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