Home / Questions / The market consensus is that Analog Electronic Corporation hasan ROE = 11% and a beta of 2
The market consensus is that Analog Electronic Corporation hasan ROE = 11% and a beta of 2.00. It plans to maintain indefinitelyits traditional plowback ratio of 3/5. This year's earnings were$2.4 per share. The annual dividend was just paid. The consensusestimate of the coming year's market return is 16%, and T-billscurrently offer a 5% return. |
a. |
Find the price at which Analog stock should sell. (Donot round intermediate calculations. Round your answer to 2 decimalplaces.) |
Price |
$ |
b. |
Suppose your research convinces you Analog will announcemomentarily that it will immediately change its plowback ratio to2/5. Find the intrinsic value of the stock. (Do not roundintermediate calculations. Round your answer to 2 decimalplaces.) |
Intrinsic value ofthe stock |
$ |
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