Alphabet Inc., formerly Google Inc. recently had a market cap of $852.83 billion, total equity of $192.19 billion, and 693.4 million shares outstanding. At about the same time, the PB of Facebook and eBay Inc. were 6.11 and 8.245, respectively. Assume that we desire a minimum 10% annual return on our investments, and that we believe Alphabet will sell at 6.0 times book value five years from now. What must Alphabet earn (ROE) on average over the next 5 years to make it a worthwhile investment? (Assume that Alphabet pays no dividends.) Do not round until your final answer. Round final answer to one decimal place (ex: 0.2345 =23.5%).
Alphabet Inc., formerly Google Inc. recently had a market cap of $852.83 billion, total equity of $192.19 billion, and 693.4 million shares outstanding. At about the same time, the PB of Facebook and eBay Inc. were 6.11 and 8.245, respectively. Assume that we desire a minimum 10% annual return on our investments, and that we believe Alphabet will sell at 6.0 times book value five years from now. What must Alphabet earn (ROE) on average over the next 5 years to make it a worthwhile investment? (Assume that Alphabet pays no dividends.) Do not round until your final answer. Round final answer to one decimal place (ex: 0.2345 =23.5%).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Alphabet Inc., formerly Google Inc. recently had a market cap of $852.83 billion, total equity of $192.19 billion, and 693.4 million shares outstanding. At about the same time, the PB of Facebook and eBay Inc. were 6.11 and 8.245, respectively. Assume that we desire a minimum 10% annual
Do not round until your final answer. Round final answer to one decimal place (ex: 0.2345 =23.5%).
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