New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Satyam Ltd. has a WACC of 5%. The sustainable growth

    rate of the company is 3%. The stock is trading at the price of Rs. 40 in the market. Assuming the markets are efficient, what should be earnings per share of the fiscal year just ended?
    A 0.98 Correct Answer Incorrect Answer
    B 0.89 Correct Answer Incorrect Answer
    C 0.65 Correct Answer Incorrect Answer
    D 0.77 Correct Answer Incorrect Answer

    Solution

    As per Gordon Growth Model Let earning for this year be E Price = Earning for next year / (WACC – growth rate) 40 = E*(1+0.03) / (5% - 3%) 0.8 / 1.03 = E E = 0.77

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