Answered step by step
Verified Expert Solution
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
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
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