Question
A corporation has a current P/E ratio of 2.8 and a current P/B ratio of 1.4. The company has a cost of equity of 50%,
A corporation has a current P/E ratio of 2.8 and a current P/B ratio of 1.4. The company has a cost of equity of 50%, a realized rate of return on equity, ROE, of 50%, and an equity reinvestment rate of 80%. The company announces that it will decrease its equity reinvestment rate to 50% effective immediately.
(a) (5 points) Find the new P/E ratio of the company following its reinvestment policy change.
(b) (5 points) Find the new P/B ratio of the company following its reinvestment policy change.
(c) (5 points) Find the new PEG ratio of the company following its reinvestment policy change.
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Introduction To The Study Of Auditing Fundamentals Of Auditing
Authors: Jorge Hernán Almeida Blacio, César Iván Casanova Villalba, Maybelline Jaqueline Herrera Sánchez
9th Edition
6204543512, 978-6204543512
