number of outstanding shares100 000Earnings300 000Retention ratio60%91-day Treasury bill rate6%Market risk premium8%UFSK Beta1.2Dividend growth rate stable phase5%Bonds outstanding5 000Par value per bond1000Semi-annual coupon rate on bonds6%Bond yield to maturity8%Bond years remaining to maturity4Corporate tax rate30%Additional informationUFSK limited recently paid a dividendUFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.Required:As an investment analyst advise your client how much must she expect to pay for UFSK limited stock.
number of outstanding shares
100 000
Earnings
300 000
Retention ratio
60%
91-day Treasury bill rate
6%
Market risk premium
8%
UFSK Beta
1.2
5%
Bonds outstanding
5 000
Par value per bond
1000
Semi-annual coupon rate on bonds
6%
Bond yield to maturity
8%
Bond years remaining to maturity
4
Corporate tax rate
30%
Additional information
UFSK limited recently paid a dividend
UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future.
Required:
As an investment analyst advise your client how much must she expect to pay for UFSK limited stock.
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