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Exam Review - Question 1

Question ID#: 127279

T-Table

F-Table 5% F-Table 2.5% Chi-Table Z-Table Alt Acronyms

Durbin-Watson Z-Table

Q-Partners is expected to have earnings in ten years of $12 per share, a dividend payout ratio of 50%, and a required return of 11%. At that time, ROE is expected to fall to 8% in perpetuity and the trailing P/E ratio is forecasted to be eight times earnings. The terminal value at the end of ten years using the P/E multiple approach and DDM is closest to: P/E multiple DDM

A) 96.32 B) 96.00 C) 96.32

85.71 89.14 89.14

Your answer: C was incorrect. The correct answer was B) 96.00 89.14
Terminal Value = P/E EPS = 8 12 = 96 D10 = 0.5 12 = 6 g = 0.50 0.08 = 4%

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