The market consensus is that Analog Electronic Corporation has an ROE = 11% and a beta of 1.45 and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year's earnings were $2.60 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, and T-bills currently offer a 6% return. Required: 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 1/4. Find the intrinsic value of the stock. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D
The market consensus is that Analog Electronic Corporation has an ROE = 11% and a beta of 1.45 and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year's earnings were $2.60 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, and T-bills currently offer a 6% return. Required: 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 1/4. Find the intrinsic value of the stock. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D
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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Transcribed Image Text:The market consensus is that Analog Electronic Corporation has an ROE = 11% and a beta of 1.45 and plans to maintain indefinitely its
traditional plowback ratio of 3/4. This year's earnings were $2.60 per share. The annual dividend was just paid. The consensus
estimate of the coming year's market return is 14%, and T-bills currently offer a 6% return.
Required:
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 1/4.
Find the intrinsic value of the stock.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Required D
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