Suppose that Bookface has earnings per share (expected next year) of $6.20 and that Bookface’s discount rate for equity is 12%. If Bookface is not expected to grow at all, what would Bookfaces’s share price be? Do not include the $ sign and answer to the nearest $0.01.
Question
Suppose that Bookface has earnings per share (expected next year) of sign and answer to the nearest $0.01.
Solution 1
The price of a share for a company that is not expected to grow is calculated using the formula:
Price = Earnings per Share / Discount Rate
In this case, the earnings per share for Bookface is $6.20 and the discount rate is 12% or 0.12 in decimal form.
So, the price of a share would be:
Price = 51.67
So, Bookface's share price would be $51.67.
Solution 2
The price of a share for a company that is not expected to grow is calculated using the formula for a perpetuity, which is:
Price = Earnings per share / Discount rate
In this case, the earnings per share for Bookface is $6.20 and the discount rate is 12% or 0.12 in decimal form.
So, the price of a share would be:
Price = 51.67
So, Bookface's share price would be $51.67.
Solution 3
The price of a share for a company that is not expected to grow is calculated using the formula:
Price = Earnings per Share / Discount Rate
In this case, the earnings per share for Bookface is $6.20 and the discount rate is 12% or 0.12 when expressed as a decimal.
So, the price of a share would be:
Price = 51.67
Therefore, the price of a share for Bookface would be $51.67.
Similar Questions
Suppose that Bookface has earnings per share (expected next year) of $6.20 and that Bookface’s discount rate for equity is 12%. Instead of your answer above, Bookface is trading at $160 per share. What is the present value of Bookface's growth opportunities per share? Do not include the $ sign and answer to the nearest $0.01.
If a discount of 16% is given on the marked price of a book, the publisher gains 20%. If the discount is increased to 20% the gain percent is 14 2/7% 14 1/7% 14 3/7% 14 4/7%
An analyst gathers the following data from a firm's latest annual financial statements:Sales: $5,250Net Income (Profit after tax): $258Assets: $15,000Debt: $8,000The analyst notes the following additional information:Price to Book Value ratio (P/BV): 3Number of shares outstanding: 3,468Based on this information, what is the firm's current market share price (per share)? (please do not enter the $ symbol)
Fill in the Blank QuestionFill in the blank question.If the price per share is equal to $75.00 and earnings per share is equal to $2.50, then the price-earnings ratio is equal to .
bookseller bought 100 copies of a book and marked its price at 40% above the cost price. He sold 40 books giving a discount of 10% and the remaining at a discount of 20%. What is his overall profit percentage?16.80%17.60%20%22%None
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.