Pacific Storage expects to have earnings per share of $5.25 in 2005, and $5.65 in 2006. The average price-earnings ratio for General industry is 10X (times). Pacific Storage has traditionally had a P/E ratio 12% higher than the industry, and in 2005 it is expected to be 15% higher than the industry. Calculate the expected price of Pacific's stock price in 2005 and 2006, based on expectations of EPS and P/E ratios.
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Pacific Storage expects to have earnings per share of $5.25 in 2005, and $5.65 in 2006. The average price-earnings ratio for General industry is 10X (times). Pacific Storage has traditionally had a P/E ratio 12% higher than the industry, and in 2005 it is expected to be 15% higher than the industry. Calculate the expected price of Pacific's stock price in 2005 and 2006, based on expectations of EPS and P/E ratios.
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- Taggart Goods Corp. just reported a net income of $11,000,000, and its current stock price is $23.00 per share. Taggart is forecasting an increase of 25% for its net income next year, but it also expects it will have to issue 2,300,000 new shares of stock (raising its shares outstanding from 5,500,000 shares to 7,800,000 shares). If Taggart’s forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does management expect its stock price to be one year from now? $20.24 per share $23.00 per share $15.18 per share $25.30 per share One year later, Taggart Goods Corp.’s stock is trading at $38.00, and the company reports its common equity value as $31,574,400. What is Taggart Goods Corp.’s market-to-book (M/B) ratio? Is it possible for a company to have a negative EPS and thus a negative P/E ratio?.Last year, Rec Room Sports reported earnings per share of $8.50 when its stock price was $212.50.This year, its earnings increased by 20 percent. If the P/E ratio remains constant, what is likely tobe the price of the stock? ExplainThe sales and profit margin of ABC Co. for 2020 were P500,000 and 15% respectively. Analysts project the sales to grow by 12% in 2021. However, because of more competition, the profit margin is expected to decline by 10% for 2021. The expected P/E multiple for the year 2021 is 22. ABC Co. has 20,000 shares outstanding. Using the earnings multiplier model, the expected price per share of ABC Co. in the year 2021 must be nearest to ₱61.60 ₱74.25 ₱82.5 ₱83.16 ₱101.64
- The current stock price of Bay James Tourism Company is $25. Current earnings per share are $15 and are expected to grow by 20% next year. Bay James Tourism's trailing and forward price-earnings ratios are:The MEDCOM firm is currently selling for €32, with trailing 12-month earnings and dividends of €1.23 and €0.64, respectively. The Price to Earnings ratio (P/E) is 26, the Price to Book Value ratio (P/BV) is 6.5 and the Price to Sales ratio (P/S) is 2.8. The return on equity is 27 percent and the profit margin on sales is 11 percent. The Treasury bond rate is 4.5 percent, the equity risk premium is 6 percent and MEDCOM’s beta is 1.3. - Calculate the MEDCOM’s required return, based on the Capital Asset Pricing Model.- Assume that the dividend and earnings growth rates are 9.5%. Calculate the P/E, P/BV and P/S ratios that would be justified given the required rate of return in i) and current values of the dividend payout ratio, ROE and profit margin. - Given that the assumptions of the constant growth model are appropriate, state whether MEDCOM is fairly priced, overpriced, or underpriced.Atlantic Northern Inc. just reported a net income of $10,000,000, and its current stock price is $31.25 per share. Atlantic Northern is forecasting an increase of 25% for its net income next year, but it also expects it will have to issue 1,800,000 new shares of stock (raising its shares outstanding from 5,500,000 shares to 7,300,000 shares). 1. If Atlantic Northern’s forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does management expect its stock price to be one year from now? $29.36 per share $31.25 per share $22.02 per share $36.70 per share 2. One year later, Atlantic Northern Inc.’s stock is trading at $38.00, and the company reports its common equity value as $42,865,600. What is Atlantic Northern Inc.’s market-to-book (M/B) ratio? 3. Is it possible for a company to have a negative EPS and thus a negative P/E ratio?
- Munson Communications Company has just reported earnings for the year ended June 30, 2011. Below are the firm’s income statement and balance sheet. The Company had a 55 percent dividend payout ratio for the last 10 years and does not plan to change this policy. Based on internal forecasts, the company expects the demand for its products to grow at a rate of 21 percent for the next year and has projected the sales growth for 2012 to be 21 percent. Assume that equity accounts and long-term debt do not vary directly with sales, but change when retained earnings change or additional capital is issued. Munson Communications Company Balance Sheet as of June 30, 2011 Assets: Liabilities and Stockholders’ Equity: Cash $1,728,639 Accounts payables $4,666,673 Accounts receivables 3,009,421 Notes payables 2,507,094 Inventories 11,492,993 Total current assets $16,231,054 Total current liabilities $7,173,767 Net fixed assets 22,380,636 Long-term debt 13,345,242…Munson Communications Company has just reported earnings for the year ended June 30, 2011. Below are the firm’s income statement and balance sheet. The Company had a 55 percent dividend payout ratio for the last 10 years and does not plan to change this policy. Based on internal forecasts, the company expects the demand for its products to grow at a rate of 21 percent for the next year and has projected the sales growth for 2012 to be 21 percent. Assume that equity accounts and long-term debt do not vary directly with sales, but change when retained earnings change or additional capital is issued. Munson Communications Company Balance Sheet as of June 30, 2011 Assets: Liabilities and Stockholders’ Equity: Cash $1,728,639 Accounts payables $4,666,673 Accounts receivables 3,009,421 Notes payables 2,507,094 Inventories 11,492,993 Total current assets $16,231,054 Total current liabilities $7,173,767 Net fixed assets 22,380,636 Long-term debt 13,345,242…Hackworth Co. is a privately owned firm with few investors. Investors forecast their earnings per share (EPS) to reach $3 this coming year. The average price-to-earnings (P/E) ratio for similar companies in the S&P 500 is 10. What is the estimated intrinsic value of Hackworth Co.’s stock per share? Market multiple analysis is also used to calculate the value of a company, which is further used to calculate the intrinsic value per share of the firm. Suppose you have the information given in the following table for Company X. Year 1 Year 2 EBITDA $7,650 $9,150 Total value of equity $76,500 $82,500 Total firm value $99,450 $132,000 What is value of the entity multiple of Company X in Year 1?
- Munson Communications Company has just reported earnings for the year ended June 30, 2011. Below are the firm’s income statement and balance sheet. The Company had a 55 percent dividend payout ratio for the last 10 years and does not plan to change this policy. Based on internal forecasts, the company expects the demand for its products to grow at a rate of 27 percent for the next year and has projected the sales growth for 2012 to be 27 percent. Assume that equity accounts and long-term debt do not vary directly with sales, but change when retained earnings change or additional capital is issued. Munson Communications Company Balance Sheet as of June 30, 2011 Assets: Liabilities and Stockholders’ Equity: Cash $1,728,639 Accounts payables $4,666,673 Accounts receivables 3,009,421 Notes payables 2,507,094 Inventories 11,492,993 Total current assets $16,231,054 Total current liabilities $7,173,767 Net fixed assets 22,380,636 Long-term debt 13,345,242…Perine, Inc., has balance sheet equity of $5.3 million. At the same time, the income statement shows net income of $763,200. The company paid dividends of $431,208 and has 120,000 shares of stock outstanding. If the benchmark PE ratio is 17, what is the target stock price in one year? Assume the firm will grow at the sustainable growth rate.The Ethereum Imports Company’s EPS in 2011 was $3.00, and in 2006 it was $1.90. The company’s payout ratio is 30%, and the stock is currently valued at $42. Flotation costs for new equity will be 7%. Net income in 2012 is expected to be $15 million. The market-value weights of the firm’s debt and equity are 40% and 60%, respectively.a. Based on the five-year track record, what is Dempere’s EPS growth rate? What will the dividend be in 2012?b. Calculate the firm’s cost of retained earnings and the cost of new common equity.c. Calculate the breakpoint associated with retained earnings.