Dominik Corporation is a fast growing company. They were the first to the market
with state-of-the-art voice identification software. Earnings per share for 2005
were $2.08 and book value per share at the beginning of 2005 was $9.55. Dominik
does not pay dividends nor is it expected to do so in the foreseeable future.
Dominik's cost of equity is 12%. Analysts predict that earnings for 2006 and
2007 will be $3.22 and $3.90, respectively, and that earnings will grow at 19%
per year for the following three years (2008-2010). The stock is currently
trading at $35 per share, and analysts have set a target price of $50 by the end
of 2006. Assuming that the analysts earnings forecasts for the next five years
are correct, and assuming that after the end of the next five years the
competition will have driven Dominik's abnormal returns down to zero, what would
your target price be for the end of 2006? What will the price to book value and
price-earnings ratios be at the end of 2006?
password: shiv
with state-of-the-art voice identification software. Earnings per share for 2005
were $2.08 and book value per share at the beginning of 2005 was $9.55. Dominik
does not pay dividends nor is it expected to do so in the foreseeable future.
Dominik's cost of equity is 12%. Analysts predict that earnings for 2006 and
2007 will be $3.22 and $3.90, respectively, and that earnings will grow at 19%
per year for the following three years (2008-2010). The stock is currently
trading at $35 per share, and analysts have set a target price of $50 by the end
of 2006. Assuming that the analysts earnings forecasts for the next five years
are correct, and assuming that after the end of the next five years the
competition will have driven Dominik's abnormal returns down to zero, what would
your target price be for the end of 2006? What will the price to book value and
price-earnings ratios be at the end of 2006?
password: shiv
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