2. The market consensus is that Analog Electronic Corporation has an ROE=9%, has a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This yearâs earnings were $3 per share. The annual dividend was just paid. The consensus estimate of the coming yearâs market return is 14%, and T-bills currently offer a 6% return.
a. Find the price at which Analog stock should sell.
b. Calculate the P/E ratio.
c. Calculate the present value of growth opportunities.
d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock. The market is still unaware of this decision. Explain why Vo no longer equals Po and why Vo is greater or less than Po
2. The market consensus is that Analog Electronic Corporation has an ROE=9%, has a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This yearâs earnings were $3 per share. The annual dividend was just paid. The consensus estimate of the coming yearâs market return is 14%, and T-bills currently offer a 6% return.
a. Find the price at which Analog stock should sell.
b. Calculate the P/E ratio.
c. Calculate the present value of growth opportunities.
d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock. The market is still unaware of this decision. Explain why Vo no longer equals Po and why Vo is greater or less than Po
Related questions
| The market consensus is that Analog Electronic Corporation has an ROE = 9%, has a beta of 1.65, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were $2.20 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 11%, and T-bills currently offer a 6% return. |
| a. | Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
| Price | $ |
| b. | Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| P/E Ratio | |
| Leading | |
| Trailing | |
| c. | Calculate the present value of growth opportunities. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
| PVGO | $ |
