Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The market consensus is that Analog Electronic Corporation has an ROE = 14%, a beta of 1.85, and plans to maintain indefinitely its traditional plowback
The market consensus is that Analog Electronic Corporation has an ROE = 14%, a beta of 1.85, and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year's earnings were $3.10 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 15%, and T-bills currently offer a 6% return. a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) P/E Ratio Leading Trailing c.Calculate the present value of growth opportunities. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) PVGO d. Suppose your research convinces you Analog will announce momentarily that it will immediately change its plowback ratio to 1/4 Find the intrinsic value of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic value
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