Solve the problem Suppose that the MC Software Corporation earns a profit of $10 per share. If the prevailing interestrate is 12 percent and the stock is currently selling for $100 per share, what is the currentprice/earnings ratio? The higher P/E ratio, ceteris paribus: A. the more rare a stock is B. the moreinvestors are willing to spend for a dollar of earnings C. the less debt a corporation owes D. all of theabove Alejandro comes to find out that Black Adam Enterprise (BLA) had earnings per share (EPS)of $16.89 and a P/E ratio of 18.21. What would the price of the stock be for Black Adam Enterprise?Want detailed answer with explanation

Question: 1Explanation of Price-Earnings Ratio:The Price-Earnings (P/E) ratio is a financial metric…

Answered: Suppose that the MC Software…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 5MC

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Suppose that the MC Software Corporation earns a profit of $10 per share. If the prevailing interest rate is 12 percent and the stock is currently selling for $100 per share, what is the current price/earnings ratio? The higher P/E ratio, ceteris paribus: A. the more rare a stock is B. the more investors are willing to spend for a dollar of earnings C. the less debt a corporation owes D. all of the above Alejandro comes to find out that Black Adam Enterprise (BLA) had earnings per share (EPS) of $16.89 and a P/E ratio of 18.21. What would the price of the stock be for Black Adam Enterprise? Want detailed answer with explanation
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Suppose instead that the company is about to pay a dividend of $2.00 per share. You also learn that the company is expected to have net income of $100 million, dividends of $50 million, and total equity of $1.5 billion (and that these relationships are expected to be stable). If the relevant required rate of return is 10%, what is the intrinsic value per share of the company’s stock?
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