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The market consensus is that Analog Electronic Corporation has an ROE = 9% and a beta of 1.70. It plans to maintain indefinitely its traditional
The market consensus is that Analog Electronic Corporation has an ROE = 9% and a beta of 1.70. It plans to maintain indefinitely its traditional plowback ratio of 1/3. This year's earnings were $3.6 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 5% 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. Suppose your research convinces you Analog will announce momentarily that it will immediately change its plowback ratio to 2/3. Find the intrinsic value of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Intrinsic value of the stock
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