The market consensus is that Analog Electronic Corporation has an ROE = 11%, a beta of 1.50, and plans to maintain indefinitely its traditional plowback ratio of 1/5. This year’s earnings were $2.50 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.)
Leading P/E:
Trailing P/E:
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 4/5. Find the intrinsic value of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
formula used to calculate the price and intrinsic value is :
price/ intrinsic value = (EPS*(1-b))/(r-g)
where; EPS = earnings per share
b = ploughback ratio
r = required return
g = growth rate of dividends/earnings
Also,
r is calculated using Capital Asset Pricing Model(CAPM)
r = T-bill return+(beta*(market return-T-bill return))
g = ROE*b
trailing P/E = current price/ current EPS
leading P/E = current price/expected EPS
The market consensus is that Analog Electronic Corporation has an ROE = 11%, a beta of...
The market consensus is that Analog Electronic Corporation has an ROE = 11%, a beta of 1.50, and plans to maintain indefinitely its traditional plowback ratio of 1/5. This year’s earnings were $2.50 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...
The market consensus is that Analog Electronic Corporation has an ROE = 11%, a beta of 1.50, and plans to maintain indefinitely its traditional plowback ratio of 1/5. This year's earnings were $2.50 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...
The market consensus is that Analog Electronics Corporation has an ROE = 15%, a beta of 1.90, and plans to maintain indefinitely its traditional plowback ratio of 1/5. This year’s earnings were $3.20 per share. The annual dividend was just paid. The consensus estimate of the coming year’s market return is 16%, 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...
The market consensus is that Analog Electronic Corporation has an ROE of 9% and a beta of 1.60. It plans to maintain indefinitely its traditional plowback ratio of 3/5. This year's earnings were $2.5 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, 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...
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The market consensus is that Analog Electronic Corporation has an ROE of 9% and a beta of 1.60. It plans to maintain indefinitely its traditional plowback ratio of 3/5. This year's earnings were $2.5 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, 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...
The market consensus is that Analog Electronic Corporation has an ROE = 13%, a beta of 1.80, and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year's earnings were $3.10 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 14%, 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...
The market consensus is that Analog Electronic Corporation has an ROE : 13%, a beta o 215. and pans to maintain inde nitely ts traditional plowback ratio of 14. This year's earnings were $3.70 per share. The annual dividend was just paid. The consensus estimate . of the coming year's market return is 14%, and T-bills currently offer a 6% return. a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to...
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