Question

Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 10% per year. a. If r= 15% and DIV1 = $3, what is the value of a share?b. What price do you forecast for the stock next year?c. What rate of return should you expect if you buy the stock today and sell it in one year?

Answer 1

The calculation of the share's value is displayed below:

Equals dividend (Required rate of return - shrinking rate)

Due to that,

$3 is the Dividend.

15% is the required rate of return.

And the 10% shrinkage rate

Adding these values to the formula above:

= $3 ÷ (15% - (-10%)

= $3 ÷ 25%

= $12.

How do you determine an organization's share value?

The value of a share is equal to the ratio of normal earnings to predicted earnings when the shares are fully paid up. If a corporation has issued 10,000 shares at a price of $10 each that have been fully paid up, determine the value of each share using the earning capacity technique.

How do I use cycle data to forecast the stock market?

In order to assist in making stock market predictions, a lot of software and specialists have been developed. A software application that aids in stock market forecasting with the aid of cycle data is the Pattern Recognition Program.

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