Chiptech, Inc, is an established computer chip firm with several profitable existing products as well as some promising new products in development. The company earned $2.40 a shere last year, and just paid out a devidend of 50.48 per share. Investors bellieve the company plans to maintain its dividend payout rasio at 20%. ROE equals 20%. Everyone in the market expects this situation to persist indefinitely a. What is the market price of Chiptech stock? The required retum for the computer chip industry is 18%, and the company has just gone ex-dividend q.e, the next dividend will be pald a year from now, at t=1 ), (Do not round intermediate calculations. Round your answer to 2 decimal places.) 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 came to the market in two years, will force Chiptech to reduce the prices of its chips to remain competitive. This will decrease ROE to 18\%, and, because of felling demand for its product, Chiptech will decrease the plawback catio to 0.7. The plowbsck ratio will be decreased at the end of the second yeac, of t=2 : The annual yearend dividend for the second year (poid at t=2 ) will be 30% of that year's earnings. What is your estimate of Chiptech's intrinsic value per share? (Hint 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 peyout ratio in t=2.) (Round your answers to 2 decimal places.) c. No one else in the market perceives the threat to Chiptech's market. In foct. you are contident that no one else wili become oware of the change in Chiptechis competitive stotus until the competior firm publicly announces its discovery neor the end of year 2 . What will be the rate of return on Chiptech stock in the coming year (le, between t=0 and r m 1)? (Hht for parts c thirough e. Poy ottention to when the market cotches on to the new situotion. A table of dividends ond 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.) d. What will be the rate of return on Chiptech stock in the second year (between t=1 and t=2 )? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) e. What will be the rate of return on Chiptech stock in the third year (between t=2 and t=3 )? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) Chiptech, Inc, is an established computer chip firm with several profitable existing products as well as some promising new products in development. The company earned $2.40 a shere last year, and just paid out a devidend of 50.48 per share. Investors bellieve the company plans to maintain its dividend payout rasio at 20%. ROE equals 20%. Everyone in the market expects this situation to persist indefinitely a. What is the market price of Chiptech stock? The required retum for the computer chip industry is 18%, and the company has just gone ex-dividend q.e, the next dividend will be pald a year from now, at t=1 ), (Do not round intermediate calculations. Round your answer to 2 decimal places.) 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 came to the market in two years, will force Chiptech to reduce the prices of its chips to remain competitive. This will decrease ROE to 18\%, and, because of felling demand for its product, Chiptech will decrease the plawback catio to 0.7. The plowbsck ratio will be decreased at the end of the second yeac, of t=2 : The annual yearend dividend for the second year (poid at t=2 ) will be 30% of that year's earnings. What is your estimate of Chiptech's intrinsic value per share? (Hint 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 peyout ratio in t=2.) (Round your answers to 2 decimal places.) c. No one else in the market perceives the threat to Chiptech's market. In foct. you are contident that no one else wili become oware of the change in Chiptechis competitive stotus until the competior firm publicly announces its discovery neor the end of year 2 . What will be the rate of return on Chiptech stock in the coming year (le, between t=0 and r m 1)? (Hht for parts c thirough e. Poy ottention to when the market cotches on to the new situotion. A table of dividends ond 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.) d. What will be the rate of return on Chiptech stock in the second year (between t=1 and t=2 )? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) e. What will be the rate of return on Chiptech stock in the third year (between t=2 and t=3 )? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.)