Question :

1). Sully Corp. presently has an EPS of $2.40, and the benchmark PE for the company is 23. Earnings are expected to grow at 5 percent per year.

a. What is your estimate of the present stock price?

Current stock price          $

b. What is the target stock price in one year?

Target stock price            $

c. Consider the company pays no dividends; evaluate the implied return on the company's stock over the next year?

Implied return of stock  %

2.

2). Red, Inc., Yellow Corp., and Blue Company each may pay a dividend of $2.70 next year. The growth rate in dividends for all three companies is 5 %. The needed return for each company's stock is 8 percent, 11 %, and 14 %, correspondingly. Evaluate the stock price for each company?

Stock price

Red, Inc.              $

Yellow Corp.       $

Blue Company   $