Question
Web Cites Research projects a rate of return of 25 percent on new projects. Management plans to plow back 30 percent of all earnings into
Web Cites Research projects a rate of return of 25 percent on new projects. Management plans to plow back 30 percent of all earnings into the firm. Earnings this year will be $2.50 per share, and investors expect a 14 percent rate of return on the stock. Calculate the following:
-
- The sustainable growth rate for Web Cites.
- The stock price of Web Cites is
- The present value of growth opportunities of Web Cites
- The P/E ratio of Web Cites is
- What would the price and P/E for Web Cites if the firm paid out all earnings as dividends?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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
Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
