The EPS on a Composite Stock Index This Past Year

question 4

Essay

The EPS on a composite stock index this past year was $3.25. The earnings are expected to grow at a constant rate of 7 percent forever. The dividend payout ratio is expected to continue at its current rate of 35 percent, and the dividend yield is expected to be 4 percent. Calculate the intrinsic value of the index.

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Definitions:

Retina

A layer at the back of the eyeball containing cells that are sensitive to light and that trigger nerve impulses that pass via the optic nerve to the brain, where a visual image is formed.

Lens

Transparent structure in the eye or an optical device that converges or diverges light to form an image.

Light Waves

Electromagnetic waves that are visible to the human eye, responsible for the phenomenon of sight.

Brightness

The perception of how luminous an object appears to the human eye, influenced by the amount of light it emits or reflects.