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Category > Business & Finance Posted 13 Jul 2017 My Price 9.00

Phoenix Corp. faltered in the recent recession

Phoenix Corp. faltered in the recent recession but has recovered since. EPS and dividends have grown rapidly since 2017.

 

2017

2018

2019

2020

2021

EPS

$.75

2.00

2.50

2.60

2.65

Dividends

$ 0

1.00

2.00

2.30

2.65

Dividend growth

—

—

100%

15%

15%

The figures for 2020 and 2021 are of course forecasts. Phoenix’s stock price today in 2019 is $21.75. Phoenix’s recovery will be complete in 2021, and there will be no further growth in EPS or dividends.

A security analyst forecasts next year’s rate of return on Phoenix stock as follows:

r = DIV/P + g= 2.30/21.75 +.15 =.256, about 26%

What’s wrong with the security analyst’s forecast? What is the actual expected rate of return over the next year?

Answers

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Status NEW Posted 13 Jul 2017 03:07 PM My Price 9.00

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