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6. Problem (6 parts) The board of directors has declared your stock will pay a dividend of $1.73 one year from today and $188 two years from today. The company has a dividend payout ratio of 45% and the PE ratio is 18.55. The required return for this type of investment is 11.5%. a. What is the EPS two years from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e... 12.34.) a. EPS in year 2 b. What is the formula you use to calculate part a? (Enter the number of the formula from your formula sheet) b. Formula number (for EPS) c. What is the price two years from now? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 12.34.) c. Price in year 2 ?? WW save d. What formula did you use to calculate part c? (Enter the number of the formula from your formula sheet) d. Formula number (price 2) e. What is the price now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 12.34.) e. Stock price now f. What formula did you use to calculate part e? (Enter the number of the formula from your formula sheet) f. Formula number (price now) Slout D P= R D (t+1) 2 Pt- (R-g) Price/share 5 PE = EPS Earnings (Revenue -Cost) 6 EPS = # shares outstanding D DPR D 8 DPR = EPS 7 EPS = D[+1 +8 R= 3 Pt 8 Annual Dividend DY = Price CGY 9 New Price - Old Price Pri Old Price 11 Pric 13 14 12 CY Annual Coupon Price CGY New Price - old Price Buy Price 1 15 PB = C [l (1+YTM) YTM (1+YTM) 17 16 (1+r) (1+r)' PVA= PMT PVAD= PMT 11 (10 - Old Price Price = Benchmark PE ratio x EPS Price 11 Price = Benchmark P/S ratio x Sales/Sharet 14 (1+R) = (1+r)(1+h) ce - old Price - uy Price 16 1 17 PVA= PMT (1+r) PVAD=PMT (1+r) r (1+r) (1+r)n 18 FVA= PMT --1 ((1+r) -1 19 FVADEPMT (1+r) PMT 20 PVp= PMT= PVA 1 (1+r) r 21 r 22 24 25 23 FV PV= (1+r) FV=PV(1+r) r= -1 In PV In (1+r) PV

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