Price-to-Book Ratio

The management of Hytrew Limited, a utility company, announced that the firm is expected to continue to generate its current return on common equity (ROCE) of 8% indefinitely. As this ROCE is below the firms required return on equity of 10%, the firm also announced that it will return all earnings to shareholders as dividends. The firms intrinsic price-to-book ratio should be:

Select one:

a.

0.67

b.

1.25

c.

0.80

d.

1.20