Growth P/E for the Stock Assignment | Homework For You

Mandy Herr — an investment analyst at Crimson Investment Management (CIM) — is currently following technology stocks. Herr works with her supervisor, Jeremy Sparks — a portfolio manager for institutional investors — to determine appropriate investments for their clients. Herr is tracking the stock of Crown Technologies (CT), a well-known competitor in the industry. She has compiled the following information about the stock. While gathering information about Crown Technologies, Herr figured out that the company experienced a significant shift from equity to debt financing last year. This year, the CEO plans to issue a significant amount of equity to replace debt in its current capital structure.Homework For You Herr found the financial statements of the firm difficult to interpret because of the poor quality of accounting disclosures. In addition, many items not presented in the financial statements were excluded from the footnotes. Herr is also evaluating the stock of Paper and Plastic Manufacturing Company Limited (PPMCL). She has compiled the following information for her analysis: PPMCL’s EPS for the current year was $3.67. PPMCL’s dividend policy is to maintain the dividend payout ratio at 40%. Based on the firm’s pro forma financial statements, the expected long-term growth rate of earnings will be 6.5%. For the next three years, the company is expected to experience growth rates of 11%, 9%, and 10% respectively, after which earnings are expected to grow at their long-term estimated growth rate. The company’s beta relative to the local stock index is 2, and the market risk premium is 5.5% The U.S. Treasury rate is 3.75%. The current market price of the stock is $43.56.

Don't use plagiarized sources. Get Your Assignment on
Growth P/E for the Stock Assignment | Homework For You
Just from $13/Page
Order Now

Sparks wishes to estimate the value of Petroleum Exploration Limited (PEL) stock. The company earned an EPS of $5.12 and paid dividends of $2.34 over the past year. Based on his analysis, Sparks estimates the long-term earnings and dividend growth rate for the firm at 5.5%. The current market price of the stock is $65.78. Sparks’ estimate of the required rate of return for the stock is 12%. Sparks has also been following a non-cyclical stock with a market price of $78.05. The stock has earned an average EPS of $1.56 over the past 5 years and is expected to earn a similar amount in the foreseeable future. The stock’s beta is 1.13, the market risk premium is 5.5%, and the risk-free rate is 4%. While having lunch, Herr and Sparks discussed the appropriateness of the dividend discount model for valuation purposes.

Herr made the following comments: Statement 1: “The Gordon Growth Model is appropriate for use when the growth rate is less than the required rate of return. The model also accommodates the possibility of negative growth rates.” Statement 2: “:Provided the DDM model is correctly applied, it’s appropriate for common stock valuation, even if the company being analyzed engages in share repurchases.”

Question: What are the PVGO and the growth P/E for the non-cyclical stock?

Exhibit 1

Year EPS ($) DPS ($)
20X3 3.75 1.50
20X4 4.68 1.60
20X5 4.70 1.40
20X6 4.50 1.50
20X7 4.43 1.50

EPS: Earnings per share; DPS: Dividends per share Get Finance homework help today

Calculate your paper price
Pages (550 words)
Approximate price: -

Why Choose Us

Quality Papers

At Myhomeworkwriters.com, we always aim at 100% customer satisfaction. As such, we never compromise o the quality of our homework services. Our homework helpers ensure that they craft each paper carefully to match the requirements of the instruction form.

Professional Academic Writers

With Myhomeworkwriters.com, every student is guaranteed high-quality, professionally written papers. We ensure that we hire individuals with high academic qualifications who can maintain our quality policy. These writers undergo further training to sharpen their writing skills, making them more competent in writing academic papers.

Affordable Prices

Our company maintains a fair pricing system for all academic writing services to ensure affordability. Our pricing system generates quotations based on the properties of individual papers.

On-Time delivery

My Homework Writers guarantees all students of swift delivery of papers. We understand that time is an essential factor in the academic world. Therefore, we ensure that we deliver the paper on or before the agreed date to give students ample time for reviewing.

100% Originality

Myhomeworkwriters.com maintains a zero-plagiarism policy in all papers. As such, My Homework Writers professional academic writers ensure that they use the students’ instructions to deliver plagiarism-free papers. We are very keen on avoiding any chance of similarities with previous papers.

Customer Support 24/7

Our customer support works around the clock to provide students with assistance or guidance at any time of the day. Students can always communicate with us through our live chat system or our email and receive instant responses. Feel free to contact us via the Chat window or support email: support@myhomeworkwriters.com.

Try it now!

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Homework Writing Services

My Homework Writers holds a reputation for being a platform that provides high-quality homework writing services. All you need to do is provide us with all the necessary requirements of the paper and wait for quality results.

Essays

Essay Writing Services

At My Homework Writers, we have highly qualified academic gurus who will offer great assistance towards completing your essays. Our homework writing service providers are well-versed with all the aspects of developing high-quality and relevant essays.

Admissions

Admission and Business Papers

With Myhomeworkwriters.com, we will help you secure a position at your desired institution. Our essay writing services include the crafting of admissions papers. We will still help you climb your career ladder by helping you write the official papers that will help you secure a job. We will guide you on how to write an outstanding portfolio or resume.

Editing

Editing and Proofreading

Myhomeworkwriters.com has a professional editorial team that will help you organize your paper, paraphrase it, and eliminate any possible mistakes. Also, we will help you check on plagiarism to ensure that your final paper posses quality and originality.

Coursework

Technical papers

My Homework Writers harbors professional academic writers from diverse academic disciplines. As such, we can develop homework writing services in all academic areas. The simplicity or complexity of the paper does not affect the quality of homework writing services.