{"id":144670,"date":"2018-02-20T23:50:30","date_gmt":"2018-02-20T23:50:30","guid":{"rendered":"https:\/\/writemyessayfree.com\/equity-exercise"},"modified":"2017-08-17T16:58:37","modified_gmt":"2017-08-17T16:58:37","slug":"equity-exercise","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/equity-exercise\/","title":{"rendered":"Equity Exercise"},"content":{"rendered":"<p><a class=\"the-stock-of-company-xyz-is-currently-price-at-80-per-share-its-earnings-this-year-t0-are-4-00-per-share-it-has-paid-out-a-dividend-equal-to-40-of-its-earnings-for-the-past-several-years-it\/\"><\/a> <\/p>\n<p>The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several years. It\u2019s Return on Equity (ROE) has been 15%.<\/p>\n<p>1. What is the company\u2019s current Dividend Yield?<\/p>\n<p>Dividend Discount Model<br \/> The market expects that companies similar to XYZ will display a rate of return of 13% per year<\/p>\n<p>2. What is the company\u2019s expected Growth Rate for Earnings &amp; Dividends?<\/p>\n<p>3. What dividends will the company pay this year (D0) and be expected to pay next year (D1)?<\/p>\n<p>4. What is the estimated value of the stock today (T=0) using the Dividend Discount Model?<\/p>\n<p>5. What is the estimated value of the stock 1 year from today (T=1)?<\/p>\n<p>Capital Asset Pricing Model (CAPM)<br \/> The current risk free interest rate is 2%<br \/> The market as a whole is expected to realize a return of 12% this year<br \/> XYZ\u2019s stock has historically displayed a Beta of 0.9<br \/> 6. Using the CAPM, what is the required rate of return that investors would demand of XYZ this year?<\/p>\n<p>7. If the required rate of return as calculated in (6) were used in the dividend discount model, what would be an appropriate value for XYZ\u2019s stock today (T=0)?<br \/> Market Multiples<br \/> 8. If the forward Price \/ Earnings ratio for XYZ during similar stages of the business cycle had ranged from 11x to 18x, what would be the range of values for its stock?<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The stock of company XYZ is currently price at $80 per share. Its earnings this year (T=0) are $4.00 per share. It has paid out a dividend equal to 40% of its earnings for the past several years. It\u2019s Return <a href=\"https:\/\/www.benedictsol.com\/blogs\/equity-exercise\/\" class=\"read-more\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-144670","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/144670","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=144670"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/144670\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=144670"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=144670"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=144670"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}