Given the following estimated financial results, value the stock of Fish Chips, Inc. , using the infinite period dividend discount model (DDM).
Sales of $1000000
Earnings of $150000
Total assets of $800000
Equity of $400000
Dividend payout ratio of 60.0%
Average shares outstanding of 75000
Real risk free interest rate of 4.0%
Expected inflation rate of 3.0%
Expected market return of 13.0%
Stock Beta at 2.1
The per share value of Fish Chips stock is approximately: (Note: Carry calculations out to at least 3 decimal places. )（）
A. $17.91.
B. $26.86.
C. -$26.39.
参考答案：B
解析：
DDM formula: P0=D1/(ke-g)
D1=( Earnings × Payout ratio)/average number of shares outstanding = ($150000×0.60)/75000=$1.20
Nominal risk - free rate=(1+real risk free rate)×(1+expected inflation)-1=1.04×1.03-1=0.0712, or 7.12%
ke=nominal risk free rate + [ beta × ( expected market return - nominal risk free rate ) ]=7.12%+2.1×(13.0%-7.12%)=0.19468
Retention=(1-Payout)=1-0.60=0.40.
ROE = (net income/sales) × (sales/total assets) × (total assets/equity) = (150000/1000000)×(1000000/800000)×(800000/400000)=0.375
g=(retention rate × ROE)=0.375×0.40=0.15
calculate: P0=D1/(ke-g)=$1.20/(0.19468-0.15)=26.86.