Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are a financial analyst at Bank of America and you have collected following information for Lotus Tech Company. The company has beta of 1.25

You are a financial analyst at Bank of America and you have collected following information for Lotus Tech Company. The company has beta of 1.25 and a ROE of 20%. The dividend payout ratio is 50%. Last twelve month earnings were $4 per share. The annual dividend was just paid. The consensus estimate of the coming years market return is 13%, and T-bills currently offer a 5% return.

1a. What is the intrinsic value of the stock? (input format: $15.32) 1b. What is PVGO? (input format: $15.32) 1c. Suppose your research convinces you that company will announce momentarily that it will immediately change its dividend payout ratio to 40%. Find the intrinsic value of the stock. (input format: $15.32)

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

More Books

Students also viewed these Finance questions