Please help me with this answers for my homework it is due asap and need good gr

Question

Please help me with this answers for my homework it is due asap and need good grades. thanks

Suppose we have a company that earned $12 per share last year on $100 dollars per share of capital (all equity), which just covered its cost of capital. Now, imagine that, due to a new product, the company is expected to produce an annual return on equity (ROE) of 14% indefinitely and that the company has a policy of paying out 30% of its earnings in dividends.

24) What growth rate in earnings and dividends would you expect this business to exhibit?

A14%

B9.8%

C4.2%

D16%

25) What earnings per share figure do you expect for the upcoming year?

A$10

B$11.40

C$13.18

D$12.50

26) What per share dividend would you expect to receive for the upcoming year?

A$4.00

B$3.00

C$3.42

D$3.95

27) What should be the price per share of this business today?

A$179.55

B$155.45

C$161.78

D$198.16

28) If the share price were actually $165, would you recommend buying the shares?

ANo. The stock price is too high relative to its intrinsic value.

BNo. The stock price is too high and should thus be sold short.

CYes. The stock price is below intrinsic value.

DYes. The stock price is above intrinsic value.

29) What is this company

Explanation / Answer

24) What growth rate in earnings and dividends would you expect this business to exhibit?

Growth rate=(1-payout)*ROE=(1-0.3)*0.14=9.8%

Option B

25) What earnings per share figure do you expect for the upcoming year?

Expected earning=current earning*(1+growth rate) =12*(1+0.098)= $13.18

Option C

26) What per share dividend would you expect to receive for the upcoming year?

Expected dividend=Expected earning*pay out=13.18*0.3=$3.95

Option D

27) What should be the price per share of this business today?

Cost of capital=12/100=12%

Price=Expected div/(Cost of capital-growth)=3.95/(0.12-0.098)=$179.55

Option A

28) If the share price were actually $165, would you recommend buying the shares?

Yes. The stock price is below intrinsic value

Option C.

29) What is this company

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