Concept explainers
The market consensus is that Analog Electronic Corporation has an
a. Find the price at which Analog Stock should sell.
b. Calculate the P/E ratio.
c. Calculate the
d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock.
e. The market is still unaware of this decision. Explain why
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Chapter 13 Solutions
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- The market consensus is that Analog Electronic Corporation has an ROE = 9% and a beta of 1.25 and plans to maintain indefinitely its traditional plowback ratio of 2/3. This year's earnings were $3 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. b. Calculate the P/E ratio. c. Calculate the present value of growth opportunities. d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/3. Find the intrinsic value of the stock. e. The market is still unaware of this decision. Explain why Vo no longer equals Po and why Vo is greater or less than Po.arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE of 9% and a beta of 1.95. It plans to maintain indefinitely its traditional plowback ratio of 3/5. This year's earnings were $2.6 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. Required: a. Find the price at which Analog stock should sell. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ 6.77 . b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Leading Trailing P/E ratio 2.47 2.60 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.) PVGO d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 2/5. Find the…arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE = 11% and a beta of 1.45 and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year's earnings were $2.60 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. Required: a. Find the price at which Analog stock should sell. b. Calculate the P/E ratio. c. Calculate the present value of growth opportunities. d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/4. Find the intrinsic value of the stock. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Find the price at which Analog stock should sell. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Pricearrow_forward
- The market consensus is that Analog Electronic Corporation has an ROE = 11% and a beta of 1.45 and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year's earnings were $2.60 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. Required: a. Find the price at which Analog stock should sell. b. Calculate the P/E ratio. c. Calculate the present value of growth opportunities. d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/4. Find the intrinsic value of the stock. Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the P/E ratio. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Leading Trailing P/E Ratio Required D 30.87 33.41arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE = 10%, a beta of 1.35, and plans to maintain indefinitely its traditional plowback ratio of 1/4. This year’s earnings were $2.80 per share. The annual dividend was just paid. The consensus estimate of the coming year’s market return is 12%, 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 2 decimal places.) b. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) 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 3/4. Find the intrinsic value of the stock. (Do not round intermediate…arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE = 12%, a beta of 1.70, and plans to maintain indefinitely its traditional plowback ratio of 1/3. This year's earnings were $2.10 per share. The annual dividend was just paid. The consensus estimate of the coming year's market return is 12%, and T-bills currently offer a 5% return. a. Find the price at which Analog's stock should sell (round to 2 decimal places). Price $? b. Calculate the P/E ratio (round to 2 decimal places). P/E Ratio Leading Trailing c. Calculate the present value of growth opportunities (round to 2 decimal places). PVGO $? d. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 2/3. Find the intrinsic value of the stock. Intrinsic Value $?arrow_forward
- The market consensus is that Analog Electronic Corporation has an ROE = 11%, a beta of 1.45, and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year’s earnings were $2.60 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 2 decimal places.) Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. 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.) c. Suppose your research convinces you Analog will announce momentarily that it will immediately change its plowback ratio to 1/4. Find the intrinsic value of the stock. (Do not round…arrow_forwardThe market consensus is that Analog Electronic Corporation has an ROE = 11% and a beta of 1.45 and plans to maintain indefinitely its traditional plowback ratio of 3/4. This year’s earnings were $2.60 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. Required: Find the price at which Analog stock should sell. Calculate the P/E ratio. Calculate the present value of growth opportunities. Suppose your research convinces you Analog will announce momentarily that it will immediately reduce its plowback ratio to 1/4. Find the intrinsic value of the stock.arrow_forwardA7X Corporation just paid a dividend of $1.40 per share. The dividends are expected to grow at 30 percent for the next 8 years and then level off to a growth rate of 6 percent indefinitely.If the required return is 12 percent, what is the price of the stock today? Choose the correct option A. 106.78 B. 2.30 C. 104.69 D. 81.49 E. 102.59arrow_forward
- The market consensus is that Analog Electronic Corporation has an ROE = 10%, a beta of 1.35, and plans to maintain indefinitely its traditional plowback ratio of 1/4. This year’s earnings were $2.80 per share. The annual dividend was just paid. The consensus estimate of the coming year’s market return is 12%, and T-bills currently offer a 6% return. a. Calculate the P/E ratio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. 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.) c. Suppose your research convinces you Analog will announce momentarily that it will immediately change its plowback ratio to 3/4. Find the intrinsic value of the stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forwardCrisp Cookware’s common stock is expected to pay a dividend of $3 a share at the end of this year (D1 = $3.00); its beta is 0.8. The risk-free rate is 5.2%, and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 a share. Assuming the market is in equilibrium, what does the market believe will be the stock’s price at the end of 3 years (i.e., what is P3)?arrow_forward5) Rossdale Company stock currently sells for $68.91 per share and has a beta of .88. The market risk premium is 7.10 percent and the risk-free rate is 2.91 percent annually. The company just paid a dividend of $3.57 per share, which it has pledged to increase at an annual rate of 3.25 percent indefinitely. What is your best estimate of the company's cost equity? A) 8.88% B) 7.74% C) 8.08% D) 6.60% E) 9.56%arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
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