Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The market consensus is that Analog Electronic Corporation has an ROE =13%, a beta of 2.00, and plans to maIntain Indefinitely its traditional plowback ratio

image text in transcribed

The market consensus is that Analog Electronic Corporation has an ROE =13%, a beta of 2.00, and plans to maIntain Indefinitely its traditional plowback ratio of 3/5. This year's earnings were $3.40 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 11%, and T-bills currently offer a 5% return. a. Find the price at which Analog stock should sell. (Do not round Intermedlate calculations. Round your answer to 2 declmal places.) b. Calculate the P/E ratio. (Do not round Intermedlate calculations. Round your answers to 2 decimal places.) c. Calculate the present value of growth opportunitles. (Negative amount should be Indlcated by a minus sign. Do not round Intermedlate calculatlons. Round your answer to 2 decimal places.) d. Suppose your research convinces you Analog will announce momentarlly that it will Immedlately reduce Its plowback ratio to 2/5. Find the Intrinsic value of the stock. (Do not round Intermedlate calculations. Round your answer to 2 declmal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Multinational Finance

Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman

1st Edition

0201844842, 978-0201844849

More Books

Students also viewed these Finance questions