Highland Pet Supplies Company forecasts earnings per share of $1.50 during the coming year. Highland has always paid a dividend equal to 30 percent of its earnings, and it anticipates continuing this practice. Earnings are expected to increase at a rate of 24 percent per year in years 2 and 3, 19 percent in year 4, and 11 percent per year thereafter. The beta of Highland stock is 1.5, the risk-free rate is 5 percent, and the market risk premium has been estimated to be 8 percent. Use Table II to answer the questions below. Round your answers for the questions below to the nearest cent. What is the current (time 0) value of a share of Highland stock? $ What value would you project for a share of stock at the beginning of year 3? $

Highland Pet Supplies Company forecasts earnings per share of $1.50 during the coming year. Highland has always paid a dividend equal to 30 percent of its earnings, and it anticipates continuing this practice. Earnings are expected to increase at a rate of 24 percent per year in years 2 and 3, 19 percent in year 4, and 11 percent per year thereafter. The beta of Highland stock is 1.5, the risk-free rate is 5 percent, and the market risk premium has been estimated to be 8 percent. Use Table II to answer the questions below. Round your answers for the questions below to the nearest cent. What is the current (time 0) value of a share of Highland stock? $ What value would you project for a share of stock at the beginning of year 3? $

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 23P

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