Bill’s Bakery expects earnings per share of $3.38 next year. Current book value

Question

Bill’s Bakery expects earnings per share of $3.38 next year. Current book value is $5.4 per share. The appropriate discount rate for Bill’s Bakery is 10 percent. Calculate the share price for Bill’s Bakery if earnings grow at 5 percent forever. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

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Given the information below for Seger Corporation, compute the expected share price at the end of 2014 using price ratio analysis. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Bill’s Bakery expects earnings per share of $3.38 next year. Current book value is $5.4 per share. The appropriate discount rate for Bill’s Bakery is 10 percent. Calculate the share price for Bill’s Bakery if earnings grow at 5 percent forever. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Bill's Bakery:
Price of Stock = D1 / (Ke - G)
=> $3.38 / (0.10 - 0.05)
=> Price of stock = $67.6

The data is not sufficient to calculate the share price based on given ratios for Seger Corporation. We need growth rate to calculate it. So, please provide.

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