A new financial analyst forecasts a longterm earnings


Imaging a situation where a company's per–share dividends for 2013 were $.70. A new financial analyst forecasts a long–term earnings growth rate of 9% per year, somewhat below the 13% decided three–to–five year earnings growth forecast reported by a firm the company hired to do analysis. According to the new analyst, the company has a required return on equity of 15%. Currently, the company's stock is trading at $52. Find a value for the company and decide if it is over valued or not. Also, how sensitive is the company’s price if the estimates for rate of return and growth rate can each vary by plus or minus 10 basis points. Please showcase how to do this in tabular form.

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Financial Management: A new financial analyst forecasts a longterm earnings
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