Question
The market consensus is that Dudley Electronic Corporation (DCE) has an ROE = 9%, has a beta of 1.25, and plans to maintain indefinitely its
The market consensus is that Dudley Electronic Corporation (DCE) has an ROE = 9%, has a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This years earnings were $3 per share. The annual dividend has just been paid. The consensus estimate of the coming years market return is 14%, and T-bills currently offer a 6% return.
a) Estimate the value of DCE stock.
b) Estimate DCEs P/E ratio.
c) Estimate DCEs present value of growth opportunities.
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Entrepreneurial Financial Management An Applied Approach
Authors: Jeffrey R Cornwall, David O Vang, Jean M Hartman
5th Edition
0367335417, 978-0367335410
