Part IV Interest Rates Valuation and Return
14.12: Value Prediction Problem
144 of 150 · 92 words
From Introduction to Financial Analysis by LibreTexts (Kenneth S. Bigel, Touro University), used under the CC BY 4.0 licence. Written for a general audience, not for NEPSE.
- Next year’s projected EPS for the S&P 500 = $132 per share
- The dividend growth rate has been = 0.04
- The risk-free rate = 0.025 (either the T-Bill or the 10-Year Note, your choice)
- The MRP (Market Risk Premium) = 0.06
- The Return-on-Equity has been = 0.11.
Using the data given, what is the value for the S&P (per share) for next year?
First, write out the DDM formula first to see what variables you already have and which are missing.
10. P 0 = $84.48 ÷ (0.085 – 0.04) = $1,877
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