Company ABC's earnings and dividends will grow at 0.5% monthly during the next five years. Its growth will stop after year 5. In year 6 and afterward, it will pay out all earnings as dividends and the market capitalization rate. Assume next year's EPS is $10 and the dividend is $5.
2007-03-23 09:40:56 · 4 answers · asked by Speed 1 in Business & Finance ➔ Investing
I think you may be missing some information. You'll need a discount rate (expected return of a risk-free investment) to determine how much your hypothetical stock is worth.
Given that information you can plug this data into a discounted cash flow formula to get the value of the stock.
If your discount rate is around 4% the stock is worth about $300/share if you can sell it for your purchase price after the earnings stop growing. Perhaps about $120 if you hold until the stock pays out enough in dividends to make the stock worthless.
2007-03-23 09:54:18 · answer #1 · answered by KurleyKyew 2 · 0⤊ 0⤋
I just looked up the stock ticker ABC, the closing price for 3/23/07 is $53.89 and heading down in the after hours. But, i have no idea where you came up with those figures because this company certainly doesn't have the earnings or the dividend payout anywhere near what your mentioning, with next year's earnings estimate at $2.93 and current dividend at $0.20.
2007-03-23 16:48:56 · answer #2 · answered by homertorpedo 3 · 0⤊ 0⤋
The stock price is whatever the market bids for it at any given moment.
2007-03-23 17:07:17 · answer #3 · answered by bob shark 7 · 0⤊ 0⤋
yahoo finance
2007-03-23 16:45:53 · answer #4 · answered by Domino 4 · 0⤊ 0⤋