CONNECT WITH LEARNSMART FOR BODIE: ESSE
11th Edition
ISBN: 2819440196239
Author: Bodie
Publisher: MCG
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Chapter 13, Problem 7PS
Tri-coat Paints has a current market value of
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A company has current, trailing earnings of 3.2 per share. The company plans to plowback 0.41, a
share of the earnings, at an ROE of 0.084. If the required rate of return is 0.095, what is the present
value of the firm's growth opportunities?
O -2.47
-2.60
-2.74
-2.37
-2.85
A company will produce $3.00 in earnings per share at the end of the year. Reinvested earnings can produce a 14% return on equity. What is the PVGO if the company decides on a 30.0% plowback policy? Assume that investors have a 9.0% required rate of return.
a. $10.42
b. $12.56
c. $13.86
d. $15.56
A firm is expected to earn $8 per share. The pay-out ratio is 60% and it will remain same.
If the ROE of the firm is 25% and required rate of return on equity is 13%, find the present
value of growth opportunities.
a. $160.00
b. $61.54
c. $98.46
d. None of the ohOU
Chapter 13 Solutions
CONNECT WITH LEARNSMART FOR BODIE: ESSE
Ch. 13 - Prob. 1PSCh. 13 - Prob. 2PSCh. 13 - If a security is underpriced [Lew intrinsic value...Ch. 13 - Deployment Specialists pays a current (annual)...Ch. 13 - Jand, Inc, currently pays a dividend of 1.22,...Ch. 13 - A firm pays a current dividend of 1, which is...Ch. 13 - Tri-coat Paints has a current market value of 41...Ch. 13 - A firm has current assets that could be sold for...Ch. 13 - Prob. 9PSCh. 13 - Miltmar Corporation will pay a year-end dividend...
Ch. 13 - Sisters Corp. expects to earn 6 per share next...Ch. 13 - Eagle Products’ EBIT is 300 , its tax rate is 21 ,...Ch. 13 - FinCorp’s free cash flow to the firm is reported...Ch. 13 - A common stock pays an annual dividend per share...Ch. 13 - The risk-free rate of return is 5 , the required...Ch. 13 - Explain why the following statements are...Ch. 13 - a. Computer stocks currently provide an expected...Ch. 13 - Prob. 18PSCh. 13 - a. MF Corp. has an ROE of 16 and a plowback ratio...Ch. 13 - The market consensus is that Analog Electronic...Ch. 13 - The FE Corporation’s dividends per share are...Ch. 13 - The stock of Negro Corporation is currently...Ch. 13 - The risk-free rate of return is 8 , the expected...Ch. 13 - Prob. 24PSCh. 13 - Chiptech, Inc., is an established computer Chip...Ch. 13 - Prob. 1CPCh. 13 - 2. Phoebe Black‘s investment club wants to buy the...Ch. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - 7. Shaar (from the previous problem) has revised...Ch. 13 - Prob. 8CP
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- Collins Corporation’s rate of return on reinvested earnings is 22%. The company will have earnings of $4.40 per share this year. If the Market requires a return of 16% for the risks of Collins, what is the Present Value of Growth Opportunities (PVGO) if the company reinvests 25% of its earnings? None of the above $6.54 $14.40 $3.93 $10.48arrow_forwardIf Gandhi & Co. has a 15% return on assets (ROA) and 25% is the pay-out ratio, what is its internal growth rate. а. 11.22% b. 12.68% с. 3.90% d. 10.12%arrow_forwardGrowers Inc. has a market capitalization (k) of 14%, and expects earnings next period of $3/share (i.e., in t=1). Growers can earn 15% on new investment (ROE), and plans to plowback 75% of earnings. What is Growers' PVGO? a. $3.94 b. $5.84 c. $10.91arrow_forward
- es The market capitalization rate for Admiral Motors Company is 8%. Its expected ROE is 10% and its expected EPS is $5. The firm's plowback ratio is 60%. Required: a. Calculate the growth rate. (Input your answer as a nearest whole percent.) Growth rate 6% b. What will be its P/E ratio? (Do not round intermediate calculations.) P/E ratioarrow_forwardWhat is the sustainable growth rate if the ROE is 17% and the payout ratio is 25%. а. 12.79% b. 8.00% с. 14.61% d. 8.62%arrow_forwardThe market capitalization rate for Admiral Motors Company is 10%. Its expected ROE is 15% and its expected EPS is $7. The firm's plowback ratio is 50%. Required: a. Calculate the growth rate. (Input your answer as a nearest whole percent.) Growth rate 1% b. What will be its P/E ratio? (Do not round intermediate calculations.) P/E ratioarrow_forward
- Oman Cement has the following returns. Beginning value=OMR. 1000, End of Year1= OMR 1050, End of Year 2=OMR. 1100, End of Year 3=OMR. 1250, End of Year 4= OMR 1300. Calculate Average Annual Growth rate (AAGR) of the company Select one: O a. 6% O b. 7.50% O c. 6.50% O d. None of the options O e. 6.84%arrow_forwardEnrich, Inc., has expected earnings of $4 per share for next year. The firm's ROE is 16%, and its earnings retention ratio is 60%. If the firm's market capitalization rate is 12%, what is the present value of its growth opportunities (PVGO)? $28.88 $38.25 O $33.34 $66.67arrow_forwardThe current market price of Venus Filters Ltd is Rs.67. The expected dividend after a year is Rs.1.40, and this dividend is expected to grow at a constant rate of 10% p.a. What is the required rate of return for shareholders? a. 12.09% b. 8.12% c. 6.18% d. 0%arrow_forward
- Given that the NPV per share of the reinvestment of the retained earnings next year for a firm is $2.50. Assuming the growth of the NPV is constant at 5% each year, with the required return rate of 12%, what is the estimated Present Value of Growth Opportunity (PVGO)? a. $35.71 b. $59.23 c. $46.75 d. $24.56arrow_forwardA certain company has expected next year earnings per share of $6. If the company wants to reinvest 60% of earnings into the firm, and the firm has an ROE of 10%. What is the current firm value if the firm has a required rate of return k=8%?arrow_forwardOur company forecasts to pay a $10 dividend next year, which represents 100% of its earnings. This will provide investors with a 9% expected return. Instead, we decide to plowback 33% of the earnings at the firm current return on equity of 12%. What is the present value of growth opportunities (PVGO)? A. 21.8 B. 10.5 C. 35.5 D. 55.5arrow_forward
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