Ironore Limited is an iron mining company whose mines are slowlybeing depleted (i.e., litt
Ironore Limited is an iron mining company whose mines are slowlybeing depleted (i.e., little by little, the amount of iron oreavailable in the mine is declining as the ore is extracted eachyear). Therefore, investors expect Ironore’s Net Income to declineeach year by 2%. Ironore’s most recent Net Income = $2 million, andthere are 500,000 shares of Ironore common stock outstanding.Ironore pays out all of its Net Income as dividends to itsshareowners. What is your estimate of Ironore’s Price/Earningsratio (i.e., ratio of stock price to earnings per share)? Assumeinvestors require a minimum rate of return = 10% on an investmentin Ironore stock.