1.3BetaReturn on Equity (ROE) in the first 5 years 28.5714%8.3333%Return on Equity (ROE) after 5 years30%Dividend payout ration in first 5 years40%Dividend payout ratio after 5 years5%Risk free rate = Treasury bond rate%3D6.5%Market Risk Premium (MRP)What is your estimate to the PE ratio for a firm that has the same characteristics?O .8.75xO b. 8.60xO c. 8.50xO d. 8.25xO e. None of the above

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What is your estimate to the PE ratio for a firm that has the same characteristics? O a. 8.75x O b. 8.60x O c. 8.50x O d. 8.25x Oe. None of the above

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 11P

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Question

1.3
Beta
Return on Equity (ROE) in the first 5 years 28.5714%
8.3333%
Return on Equity (ROE) after 5 years
30%
Dividend payout ration in first 5 years
40%
Dividend payout ratio after 5 years
5%
Risk free rate = Treasury bond rate
%3D
6.5%
Market Risk Premium (MRP)
What is your estimate to the PE ratio for a firm that has the same characteristics?
O .
8.75x
O b. 8.60x
O c. 8.50x
O d. 8.25x
O e. None of the above

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