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Author Question: The Oxford Heating Company has been very successful in the past four years. Over these years, it ... (Read 143 times)

sarasara

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on: Jul 10, 2018
The Oxford Heating Company has been very successful in the past four years. Over these years, it paid common stock dividend of 4 in the first year, 4.20 in the second year, 4.41 in the third year, and its most recent dividend was 4.63.
 
  The company wishes to continue this dividend growth indefinitely. What is the value of the company's stock if the required rate of return is 12 percent?

Question 2

The key inputs for preparing pro forma income statements using the simplified approaches are the ________.
 
  A) sales forecast for the preceding year and financial statements for the coming year
  B) sales forecast for the coming year and the cash budget for the preceding year
  C) sales forecast for the coming year and financial statements for the preceding year
  D) cash budget for the coming year and sales forecast for the preceding year


AISCAMPING

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Constant growth rate, g = (4.63 / 4.00 )1/3 - 1 = 0.04996, g = 5
P = D5 / (r - g) = 4.63 (1 + 0.05 ) / (0.12 - 0.05 ) = 69.45

Answer to Question 2

C


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