Question
The market consensus is that Analog Electronic Corporation has an ROE of 8% and a beta of 1.35. It plans to maintain indefinitely its traditional
The market consensus is that Analog Electronic Corporation has an ROE of 8% and a beta of 1.35. It plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were $2.2 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 16%, and T-bills currently offer a 6% return
Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
