b. Suppose you discover that Chiptech's competitor has developed a new chip that will eliminate Chiptech's current technological advantage in this market. This new product, which will be ready to come to the market in two years, will force Chiptech to reduce the prices of its chips to remain competitive. This will decrease ROE to 16%, and, because of falling demand for its product Chiptech will decrease the plowback ratio to OS The plowback ratio will be decreased at the end of the second year, at 7-2 The annual year-end dividend for the second year (paid at =2) will be 50% of that year's earnings What is your estimate of Chiptech's intrinsic value per share? (Wint. Carefully prepare a table of Chiptech's earnings and dividends for each of the next three years. Pay close attention to the change in the payout ratio in l. 2) (Round your answers to 2 decimal places.) Al time 2 At time c. No one else in the market perceives the threat to Chiptech's market. In fact, you are confident that no one else will become aware of the change in Chiptech's competitive status ant the competitor firm publicly announces its discovery near the end of year 2 What will be the rate of return on Chiptech stock in the coming year ce between 0 and 1)? Wit for parts through e Pay attention to when the market catches on to the new situation A table of dividends and market prices over time might help) (Do not round Intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate ofron d. What will be the rate of return on Chiptech stock in the second year (between r=1 and 7-21? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of in N Problem 18-20 Chiptech Inc. an established computer chip form with several profitable existing products as well as some promising new products in development. The company earned $2.10 a share last year and just paid out a dividend of 50.34 per share travestors believe the company plans to maintain is dividend payout ratio 40% ROE eguh 23 Everyone in the market expects this station to perso indefinitely What is the marketpnce of Chiptech stock the required return for the computer chip industry is and the company has gone e dividend be the next dividend will be paid a year from now.at Do not round intermediate calculations. Round your onewers to 2 decimal places) Market price W Cheech Wok 36 b. Suppose you discover that Chiptech's competitor has developed a new chip that we eliminate Chiptech's current technological advantage in this market. This new product be ready to co to the market in two a will hiptech to reduce the prices of its chips to remain competitive. This will decrease ROE 10 16% and, because of fang demand for its product Chiptech will decrease the plowback ratio to 05 The plowback ratio will be decreased at the end of the second year 1-2 The annual year end dividend for the second year ipad at t= 2) will be 50% of that year's earnings What is your estimate of Chiptech intrinsic e pe share in carefully prepare a table of Chiptechs earnings and dividends for each of the next three years paydose attention to the change in the payout ratio int2) (Round your answers to 2 decimal places Amez At
