EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 18, Problem 10PS
A
Summary Introduction
To calculate: The selling price of analog stock as per the given information.
Introduction: The price to earnings ratio or 
ratio is used to determine the relationship between the price of stocks and its earnings.
B
Summary Introduction
To calculate: The P/E ratio as per the given information.
Introduction: The price to earnings ratio or 
ratio is used to determine the relationship between the price of stocks and its earnings.
C
Summary Introduction
To calculate: The
Introduction:
The present value of the growth opportunities can be defined as the present value of the additional cash flow.
The price to earnings ratio or 
ratio is used to determine the relationship between the price of stocks and its earnings.
D
Summary Introduction
To calculate: The intrinsic value of stock is to be determined when plowback ratio reduces to 1\3
Introduction:
The intrinsic value of stock can be called as the anticipated or calculated value of the company which may or may not be same as the current market value. The intrinsic value of the stock also includes the tangible and intangible factors.
The present value of the growth opportunities can be defined as the present value of the additional cash flow.
The price to earnings ratio or 
ratio is used to determine the relationship between the price of stocks and its earnings.
E
Summary Introduction
To calculate: It is to be determined that 
no longer equals to 
and also 
is greater or less than
Introduction:
The intrinsic value of stock can be called as the anticipated or calculated value of the company which may or may not be same as the current market value. The intrinsic value of the stock also includes the tangible and intangible factors.
The present value of the growth opportunities can be defined as the present value of the additional cash flow.
The price to earnings ratio or 
ratio is used to determine the relationship between the price of stocks and its earnings.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The market consensus is that Analog Electronic Corporation has an ROE = 12%, has a beta of 2.10, and plans to maintain indefinitely its traditional plowback ratio of 1/3. This year's earnings were $3.60 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 13%, and T-bills currently offer a 5% return. a. Find the price at which Analog stock should sell
Calculate the P/E ratio
c. Calculate the present value of growth opportunities.
The market consensus is that Analog Electronic Corporation has an ROE = 9%, a beta of 1.25, and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year’s earnings were $3 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.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.e. The market is still unaware of this decision. Explain why V0 no longer equals P0 and why V0 is greater or less than P0.
The market consensus is that Analog Electronic Corporation has an ROE = 9% and a beta of
1.25 and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings
were $3 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.
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.
e. The market is still unaware of this decision. Explain why Vo no longer equals Po and why Vo
is greater or less than Po.
Chapter 18 Solutions
EBK INVESTMENTS
Ch. 18 - Prob. 1PSCh. 18 - Prob. 2PSCh. 18 - Prob. 3PSCh. 18 - Prob. 4PSCh. 18 - Prob. 5PSCh. 18 - Prob. 6PSCh. 18 - Prob. 7PSCh. 18 - Prob. 8PSCh. 18 - Prob. 9PSCh. 18 - Prob. 10PS
Ch. 18 - Prob. 11PSCh. 18 - Prob. 12PSCh. 18 - Prob. 13PSCh. 18 - Prob. 14PSCh. 18 - Prob. 15PSCh. 18 - Prob. 16PSCh. 18 - Prob. 17PSCh. 18 - Prob. 18PSCh. 18 - Prob. 19PSCh. 18 - Prob. 20PSCh. 18 - Prob. 1CPCh. 18 - Prob. 2CPCh. 18 - Prob. 3CPCh. 18 - Prob. 4CPCh. 18 - Prob. 5CPCh. 18 - Prob. 6CPCh. 18 - Prob. 7CPCh. 18 - Prob. 8CPCh. 18 - Prob. 9CPCh. 18 - Prob. 10CPCh. 18 - Prob. 11CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- 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 Calculate the P/E ratio. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Leading Trailing P/E Ratio Required D 30.87 33.41arrow_forwardThe 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 Find the price at which Analog stock should sell. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Pricearrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE of 9% and a beta of 1.95. It plans to maintain indefinitely its traditional plowback ratio of 3/5. This year's earnings were $2.6 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. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ 6.77 . b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Leading Trailing P/E ratio 2.47 2.60 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.) PVGO d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 2/5. Find the…arrow_forward
- 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: Find the price at which Analog stock should sell. Calculate the P/E ratio. Calculate the present value of growth opportunities. 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.arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE = 12%, a beta of 1.70, and plans to maintain indefinitely its traditional plowback ratio of 1/3. This year's earnings were $2.10 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 12%, and T-bills currently offer a 5% return. a. Find the price at which Analog's stock should sell (round to 2 decimal places). Price $? b. Calculate the P/E ratio (round to 2 decimal places). P/E Ratio Leading Trailing c. Calculate the present value of growth opportunities (round to 2 decimal places). PVGO $? d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 2/3. Find the intrinsic value of the stock. Intrinsic Value $?arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE of 10% and a beta of 2.20. It plans to maintain indefinitely its traditional plowback ratio of 3/5. This year's earnings were $4.4 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 15%, and T-bills currently offer a 5% return. Required: a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Price $ 8.88 b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Leading Trailing Answer is not complete. P/E ratio 2.02 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.) Answer is complete but not entirely correct. PVGO $ (7.42) d. Suppose your research convinces you…arrow_forward
- need help on allarrow_forwardThe Isberg Company just paid a dividend of $1.90 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.10, the market risk premium is 5.00%, and the risk-free rate is 3.50%. What is the company's current stock price, P0? Do not round intermediate calculations.arrow_forwardCrisp Cookware’s common stock is expected to pay a dividend of $3 a share at the end of this year (D1 = $3.00); its beta is 0.8. The risk-free rate is 5.2%, and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 a share. Assuming the market is in equilibrium, what does the market believe will be the stock’s price at the end of 3 years (i.e., what is P3)?arrow_forward
- Nachman Industries just paid a dividend of Do = $1.50. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 4% in Year 3 and thereafter. The required return on this low-risk stock is 7.00%. What is the best estimate of the stock's current market value? Do not round intermediate calculations. a. $52.41 b. $70.14 c. $64.40 d. $68.64 e. $66.15arrow_forwardpleaseeee helppparrow_forwardSchnusenberg Corporation just paid a dividend of DO $2.10 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 2.00, the required return on the market is 14.50%, and the risk - free rate is 4.50%. What is the company's current stock price? Do not round intermediate calculations. a. $12.43 b. $11.67 c. $9.13 d. $27.96 e. $34.41 =arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY