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Castles in the Sand generates a rate of return of 10% on its investments and maintains a plowback ratio of 0.50. Its earnings this year
Castles in the Sand generates a rate of return of 10% on its investments and maintains a plowback ratio of 0.50. Its earnings this year will be $3 per share. Investors expect a rate of return of 8% on the stock. a. Find the price and P/E ratio of the firm. (Do not round intermediate calculations. Round your answers to 2 decimal places.) $ Price P/E ratio 50.00 16.67 b. Find the price and P/E ratio of the firm if the plowback ratio is reduced to 0.40. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price P/E ratio $ 40.00 13.33%
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