Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) In spring of 1999, pricing of Internet companies was matter of debate among finance practitioners and academics alike. Take the case of AOL, which on April 22, 1999 closed at $148.6875, consensus had a next-year earnings estimate of $0.53 per share, forward P/E =281, and 49.5% annual nominal earnings growth for the next 5 years. Suppose that AOL’s annual growth was expected to reduce to 28% during the following 5 years and then to settle down to average long-term growth of 8%. AOL’s 5-year growth consensus was about 2% higher than long-term nominal growth of earnings forecasted at that time for the S&P 500 as a whole. Additionally, suppose that after ten years AOL was expected to start a 51% dividend payout (about same as the long-term average of the S&P 500). Value AOL share’s by discounting future dividends. Assume a cost of equity of 10%. Interpret your results. How many times would AOL require to grow its real earnings over 10 years to give explanation for your result? Suppose 2.5% annual in?ation.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914864

Have any Question? 


Related Questions in Basic Finance

Assignment 2 required assignment 2-genesis energy capital

Assignment 2: Required Assignment 2-Genesis Energy Capital Plan Report The Genesis Energy operations management team, nearing completion of its agreement with Sensible Essentials, was asked by senior management to presen ...

You have been asked to evaluate the effects of a new

You have been asked to evaluate the effects of a new educational video that was developed to reduce racial prejudice among adolescents. You plan to administer a pretest measure of racial attitudes to 60 adolescent partic ...

Explain why interest rate swaps are more widely used than

Explain why interest rate swaps are more widely used than currency and equity swaps? Explain how swaps are similar to but different from forward contracts ? Suppose that a party engages in a swap, but before the expirati ...

What distinguishes a partnership from a corporation what is

What distinguishes a partnership from a corporation? What is limited liability? How does income get taxed twice in the case of a corporation? Which forms of business have a perpetual life? What are agency costs? What is ...

1 what are the main reasons that lenders charge interest on

1. What are the main reasons that lenders charge interest on loans? 2. Give an example of a financial transaction that requires a payment in the future. 3. If you deposit $1,000 in a bank CD that pays interest of 3% per ...

Divide speaking responsibilities for a team presentationin

Divide speaking responsibilities for a team presentation In teams of three or four, plan how to divide parts of a presentation. Your topic is international copyright laws, and your audience consists of an international g ...

Project finance is difficult to define what are its

Project finance is difficult to define. What are its essential features? When deciding whether or not to back a project finance proposition, what essential features do potential lenders home in on?

If us-based mncs are concerned with how shareholders react

If US-based MNCs are concerned with how shareholders react to changes in consolidated earnings, but prefer not to hedge their translation exposure, how might they attempt to reduce shareholder reaction to a decline in co ...

How does a conversion provision on a debt obligation

How does a conversion provision on a debt obligation provide an option to the investor? If the yield on a Treasury security is 3% and that of a similar-maturity municipal bond is 2.5%, what is the muni-Treasury yield rat ...

1 how might land development activities be specialized why

1. How might land development activities be specialized? Why is this activity different from project development discussed in the preceding chapter? 2. What is an option contract? How is it used in land acquisition? What ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen