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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

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

$  

Abhinav 30-Nov-2019

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