The market capitalization rate for Admiral Motors Company is 10%. Its expected ROE is 15% and its expected EPS is $7. The firm's plowback ratio is 50%. Required: a. Calculate the growth rate. (Input your answer as a nearest whole percent.) Growth rate % b. What will be its P/E ratio? (Do not round intermediate calculations.) P/E ratio

The market capitalization rate for Admiral Motors Company is 10%. Its expected ROE is 15% and its expected EPS is $7. The firm's plowback ratio is 50%. Required: a. Calculate the growth rate. (Input your answer as a nearest whole percent.) Growth rate % b. What will be its P/E ratio? (Do not round intermediate calculations.) P/E ratio

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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1) A firm that is currently unlevered has WACC = rS = 10%/year. This company plans to do a recapitalization by issuing debt and repurchasing equity. After the recapitalization, the debt-to-equity (D/E) ratio will be 0.5. If the cost of debt, rD, is 6%, what will be rS after the recapitalization? 2) A firm with wD = 0.35 and wS = 0.65 plans to issue another $100 million of permanent debt. The firm's tax rate is 21%. The bonds will be issued at par with coupon rate = rD = 7%/year. The firm's WACC is 11%/year. By how much will the new debt change the value of the firm, and who will receive this value? A) Firm value will increase by $21 million, and all $21 million will go to the shareholders B) Firm value will increase by $9 million, and 35% will go to the bondholders, 65% to the shareholders C) Firm value will increase by $18.6 million, and 35% will go to the bondholders, 65% to the stockholders D) Firm value will increase by $21 million, and all $21 million will go to the…
Premier Corporation has an ROE of 14.9 percent and a payout ratio of 48 percent. What is its sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Answer is complete but not entirely correct. Sustainable growth rate 7.75 %
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Calculate the intrinsic value of Toyota in each of the following scenarios by using the three-stage growth model of Spreadsheet . Treat each scenario independently. Required: The terminal growth rate will be 5.7%. Note: Round your answer to 2 decimal places. Toyota’s actual beta is 0.85. Note: Round your answer to 2 decimal places. The market risk premium is 8.7%. Note: Round your answer to 2 decimal places.
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XYZ Corp. is anticipating a sustained growth rate of 15% per year. Is it possible for them to achieve this growth rate given the following numbers. Debtequity ratio of 0.40 times Profit margin is 5.3 percent Capital Intensity Ratio is 0.75 times To answer: determine what the dividend payout ratio must be. How do you interpret the result? no excel plz
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Which of the following is the better option for an average firm? A. A debt ratio = 30% and a timed interest earned 15. B. A debt ratio = 80% and a timed interest earned = 8. C. A debt ratio 60% and a timed interest earned = 2. D. A debt ratio = 10% and a timed interest earned = 7. - =
A firm has an asset turnover ratio of 5.0. Its plowback ratio is 50%, and it is all-equity-financed. If the profit margin of the firm is 3%, what is the maximum payout ratio that will allow it to grow at 5% without resorting to external financing? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Maximum payout ratio %
You forecast the company RIO will have a sustainable ROE of 15% in the future, similar to the industry average of 15%. The company has a dividend payout ratio of 50% versus industry average of 50%. The company had less debt and operation leverage compare to industry, as a result , RIO has a beta of 1.8 versus the industry average of 2. Based on these information, should the company RIO have a higher or lower PE ratio than the industry average ? Given a risk free rate of 2% and market risk premium of 8%, what is RIO’s “intrinsic” forward PE ratio based on formula?

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