INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 18, Problem 7PS
Summary Introduction
To calculate: The
Introduction: The value of growth opportunity is the difference of the price per share to the no growth per share.
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If Gandhi & Co. has a 15% return on assets (ROA) and 25% is the pay-out ratio, what is
its internal growth rate.
а. 11.22%
b. 12.68%
с. 3.90%
d. 10.12%
Suppose the Earnings Multiple of the comparable firms is 10.5 and the next year projected net income of Firm X
is $990 million, what is the terminal value for Firm X based on the earnings multiple approach?
O a. $9812
O b.
$10395
O c. $12945
O d. $12815
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Chapter 18 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
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
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- What is the sustainable growth rate if the ROE is 17% and the payout ratio is 25%. а. 12.79% b. 8.00% с. 14.61% d. 8.62%arrow_forwardQ2: DEK Corporation has ROE of 20% and a retention (plowback) ratio of 60% in 2020. Suppose the require rat of return for Hunter corporation is 14%. (1) What is the dividend payout rate ? < (2) Given all the information above ,what is the Price Earning ratio (PE ratio) of Hunter Corporation ? <arrow_forwardA company has current, trailing earnings of 3.2 per share. The company plans to plowback 0.41, a share of the earnings, at an ROE of 0.084. If the required rate of return is 0.095, what is the present value of the firm's growth opportunities? O -2.47 -2.60 -2.74 -2.37 -2.85arrow_forward
- Oman Cement has the following returns. Beginning value=OMR. 1000, End of Year1= OMR 1050, End of Year 2=OMR. 1100, End of Year 3=OMR. 1250, End of Year 4= OMR 1300. Calculate Average Annual Growth rate (AAGR) of the company Select one: O a. 6% O b. 7.50% O c. 6.50% O d. None of the options O e. 6.84%arrow_forwardProvide answerarrow_forwardA company will produce $3.00 in earnings per share at the end of the year. Reinvested earnings can produce a 14% return on equity. What is the PVGO if the company decides on a 30.0% plowback policy? Assume that investors have a 9.0% required rate of return. a. $10.42 b. $12.56 c. $13.86 d. $15.56arrow_forward
- Suppose a firm expects EPS of $1.50 for the end of period and expect to mantain a dividend payout ratio of 60%. if the firm's price earning ratio is 7.8 and its return on equity is 10%, what is its required rate of returnarrow_forwardIf the net profit of the firm is OMR 280000 and the capital employed is OMR 1400000, then the return on capital employed will be 20%. During inflation with net profit calculated with replacement cost is OMR 150000 and the capital employed is OMR 2000000. Then the return on capital employed will be: a) 14% b) 6.82% c) 7.5% d) 9%arrow_forwardCan you answer this accounting question without use ai?arrow_forward
- If Gandhi & Co. has a 15% return on assets (ROA) and 25% is the pay-out ratio, what is its internal growth rate. a. 11.22% b. 12.68% c. 3.90% d. 10.12%arrow_forwardGiven that the NPV per share of the reinvestment of the retained earnings next year for a firm is $2.50. Assuming the growth of the NPV is constant at 5% each year, with the required return rate of 12%, what is the estimated Present Value of Growth Opportunity (PVGO)? a. $35.71 b. $59.23 c. $46.75 d. $24.56arrow_forwardes The market capitalization rate for Admiral Motors Company is 8%. Its expected ROE is 10% and its expected EPS is $5. The firm's plowback ratio is 60%. Required: a. Calculate the growth rate. (Input your answer as a nearest whole percent.) Growth rate 6% b. What will be its P/E ratio? (Do not round intermediate calculations.) P/E ratioarrow_forward
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