ERC is the largest logging  company in the United States. Their logging reserves are being depleted and is in turn causing sales to fall. In addition,new environmental protection policies are making it very difficult for the procurement of new logging sites. As a result,their dividends are declining at a constant rate of 5% per year.Dividends paid at the end of last yer are 5$ per share, and the required rate of return on the stock is 15%.a) what is the value of ERC stock?b)Assess the estimation techniques of long term corporate investments, in your answer focus on the relationship between time and accuracy in stock valuation techniques?

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Asked Oct 16, 2019
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ERC is the largest logging  company in the United States. Their logging reserves are being depleted and is in turn causing sales to fall. In addition,new environmental protection policies are making it very difficult for the procurement of new logging sites. As a result,their dividends are declining at a constant rate of 5% per year.Dividends paid at the end of last yer are 5$ per share, and the required rate of return on the stock is 15%.

a) what is the value of ERC stock?

b)Assess the estimation techniques of long term corporate investments, in your answer focus on the relationship between time and accuracy in stock valuation techniques?

  

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Step 1

The amount received by shareholders on periodic basis against providing equity to company is known as dividend.

Step 2

a)

The value of stock is ca...

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(1+ g) Stock price Dox- Ке-g Here, Do is last dividend g is growth rate. Ke is required rate of return Substitute $5 for Do,-5% for g and 15% for Ke in the above formula (1+(-5%) 15%-(-5%) Stock price $5x (1-0.05) = $5x 0.15+0.05 0.95 = $5x 0.20 = $5x 4.75 =$23.75

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