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LOS f: Calculate and interpret the intrinsic value of a share of common stock using a single-stage (constant-growth) residual income model.
Q1. Advanced Instruments reported the following for the end of its fiscal year:
- Revenues = $50.3 million.
- Assets = $33.8 million.
- Liabilities = $13.8 million.
- Earnings per share = $0.68.
- Dividends per share = $0.17.
- Shares outstanding = 5 million.
- Tax rate = 40%.
If the required rate of return is 15%, what is the value of the shares using a single-stage residual income model?
A) $12.77.
B) $7.56.
C) $4.78.
Q2. Midland Semiconductor has a book value of $10.50 per share. The company’s return on equity is 20%, and its required return on equity is 17%. The dividend payout ratio is 30%. What is the value of the shares using a single-stage residual income model?
A) $10.50.
B) $21.00.
C) $31.50.
Q3. Big Sky Ranches reported the following for the end of its fiscal year:
- Revenues = $40.8 million.
- Pretax income = $8.6 million.
- Assets = $53.2 million.
- Liabilities = $27.8 million.
- Dividends per share = $0.35.
- Shares outstanding = 8 million.
- Tax rate = 35%.
The beta for Big Sky Ranches is 1.2, the current risk-free rate is 4.5%, and the expected return on the market is 12.5%. What is the value of the shares using a single-stage residual income model?
A) $23.23.
B) $11.28.
C) $8.10. | 
发表于 2009-3-9 17:59
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