Suppose a company in the E-commerce industry is expected to pay a dividend of $0.28 per share wit plowback ratio of 40% which is common for the industry. It is also known that, on average, 75% of the price for companies in this industry is paid by the investors for the present value of growth opportunit (PVGO). The estimated fair value per share for the company stock if the required return is 12% per ann closest to O a. $15.6 O b. $14.7 O c. $20.5

Suppose a company in the E-commerce industry is expected to pay a dividend of $0.28 per share wit plowback ratio of 40% which is common for the industry. It is also known that, on average, 75% of the price for companies in this industry is paid by the investors for the present value of growth opportunit (PVGO). The estimated fair value per share for the company stock if the required return is 12% per ann closest to O a. $15.6 O b. $14.7 O c. $20.5

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

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Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Suppose instead that the company is about to pay a dividend of $2.00 per share. You also learn that the company is expected to have net income of $100 million, dividends of $50 million, and total equity of $1.5 billion (and that these relationships are expected to be stable). If the relevant required rate of return is 10%, what is the intrinsic value per share of the company’s stock?
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