Question8 6 pts Sunshine Company operates retail sunglass kiosks in shopping mal

Question

Question8 6 pts Sunshine Company operates retail sunglass kiosks in shopping malls. Below is information related to the company. Required rate of return on equity (RE) is 8.5%. Assuming that steady-state growth in year 2022 and beyond will be 496 (ie, g. 2012 2018 20122020 2021 2022 $412 $478 $636 $827 $950 $1.284 1.512 Dividends to Common Equity (in thousands) Common Shares Outstanding (in thousands) Calculate the present value of continuing value of Sunshine at the start of 2022 using the perpetuity-with-growth model. $21.488.2 $1.403.28 $18,976 $2.512.23

Explanation / Answer

To calculate value at the starting of 2022 we need to calculate the value at the end of 2022 and then we need to add dividend of 2022 and then discount the total value for 1 year with 8.5% interest rate.

Value of security at the end of 2022 = D1/(r-g)

Where D1 = 1284 + 1284×4% = 1335.36

r = 8.5% and g = 4%

so total value at the end is 1335.36/(0.085- 0.04) = 29675

present value at the starting of 2022 is 29675+1284/1.085 = 28534

Per share value = 28534/1512 = 18.87 and the closest amount is 18.97 will be the answer.

Hope this will help you.

Good Luck!??

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