The P/E ratio for Mailbu Boats (MBUU) is 13.24 and the expected growth rate is 16%. If the plowback ratio is 80% what is the current required rate of return (market capitalization rate) of the stock?
P/E Ratio = 13.24
Price = 13.24E
As per Constant Growth Model,
Price = 0.20(E)(1.16)/(r - 0.16)
r = 0.20(E)(1.16)/(13.24)(E) + 0.16
r = 17.75%
Required Rate = 17.75%
The P/E ratio for Mailbu Boats (MBUU) is 13.24 and the expected growth rate is 16%....
The P/E ratio for Mailbu Boats (MBUU) is 13.24 and the expected growth rate is 16%. If the plowback ratio is 80% what is the current required rate of return (market capitalization rate) of the stock?
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Questions 4-6
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