(a) Compute the expected book value per share at time 1.(b) Compute the expected earnings per share of DTI at time 2.(c) Compute the expected value of the ex-dividend stock price at time 2.(d) Compute the expected value of the ex-dividend stock price at time 0.(e) Compute the expected return (over a single-period) on the stock of DTI at time 0 (in %). Digital Timber International (DTI) is a developer of distributed data storage technologies. The profitability ofDTI and its investment policy are summarized in the following table:Expected earnings per sharePlow-Back RatioBook Value per Share0$1001$27.90.79 0.58 02 3Assume that without new investments, expected earnings of DTI would remain at their time-1 level inperpetuity. All investments are expected to generate a constant level of incremental earnings per year inperpetuity for each $1 of investment. For the time-1 investment, the cash flow is $0.2 per $1 invested, and forthe time-2 investment, it is $0.15. For an investment made at time t, incremental cash flows are generatedstarting in year t + 1. The plow-back ratio will remain equal to 0 after year 3. The appropriate discount rate forall future cash flows of DTI is 11.3%.

Select financials have been provided for a stock. We have to calculate various per share data. You…

Digital Timber International (DTI) is a developer of distributed data storage technologies. The profitability of DTI and its investment policy are summarized in the following table: Expected earnings per share Plow-Back Ratio Book Value per Share b $100 1 $27.9 0.79 0.58 0 2 3 Assume that without new investments, expected earnings of DTI would remain at their time-1 level in perpetuity. All investments are expected to generate a constant level of incremental earnings per year in perpetuity for each $1 of investment. For the time-1 investment, the cash flow is $0.2 per $1 invested, and for the time-2 investment, it is $0.15. For an investment made at time t, incremental cash flows are generated starting in year t + 1. The plow-back ratio will remain equal to 0 after year 3. The appropriate discount rate for all future cash flows of DTI is 11.3%.

Digital Timber International (DTI) is a developer of distributed data storage technologies. The profitability of DTI and its investment policy are summarized in the following table: Expected earnings per share Plow-Back Ratio Book Value per Share b $100 1 $27.9 0.79 0.58 0 2 3 Assume that without new investments, expected earnings of DTI would remain at their time-1 level in perpetuity. All investments are expected to generate a constant level of incremental earnings per year in perpetuity for each $1 of investment. For the time-1 investment, the cash flow is $0.2 per $1 invested, and for the time-2 investment, it is $0.15. For an investment made at time t, incremental cash flows are generated starting in year t + 1. The plow-back ratio will remain equal to 0 after year 3. The appropriate discount rate for all future cash flows of DTI is 11.3%.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...

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