Question
Even Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 15%, and it will
Even Better Products has come out with a new and improved product. As a result, the firm projects an ROE of 15%, and it will maintain a plowback ratio of 0.40. Its projected earnings are $3 per share. Investors expect a 11% rate of return on the stock.
a. At what price and P/E ratio would you expect the firm to sell? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| Price | $ |
| P/E ratio | |
b. What is the present value of growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
PVGO $
c. What would be the P/E ratio and the present value of growth opportunities if the firm planned to reinvest only 20% of its earnings? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| P/E ratio | |
| PVGO | $ |
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Shape Up Your Finances The Personal Finances Handbook
Authors: Ian Birt
1st Edition
0734608268, 978-0734608260
