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The market consensus is that Analog Electronic Corporation has an ROE = 23%, a beta of...

The market consensus is that Analog Electronic Corporation has an ROE = 23%, a beta of 2.20, and plans to maintain indefinitely its traditional plowback ratio of 2/5. This year’s earnings were $3.80 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.

a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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.)

d. Suppose your research convinces you Analog will announce momentarily that it will immediately change its plowback ratio to 3/5. Find the intrinsic value of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

VERY GOOD SUM FROM "KANE" BOOK

EXPLAINS HOW POOR ROE LEADS TO EROSION IN VALUE OF STOCK

jeff jeffy answered 1 year ago
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